EU confirms 12-month delay on Priips

EU confirms 12-month delay on Priips

The European Commission has confirmed plans to delay upcoming Packaged Retail and Insurance-based Investment Products (Priips) rules by a year after key elements of the regulation were rejected by MEPs.

European Commission vice-president Valdis Dombrovskis, responsible for Financial Stability, Financial Services and the Capital Markets Union, said: "To ensure legal certainty and a smooth implementation for consumers we are today proposing to extend the date of application by one year.

"The extension should be limited to one year only and we are glad that the European Parliament and the Council are supportive of the view that the substance of the rules should not be re-opened."

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Earlier this week German and Green MEP Sven Giegold said that discussions between MEPs and the Commission on Monday evening (November 7) had produced an agreement over a delay to implementation of the regulation, which was scheduled to come into force on January 1 2017.

"The negotiation parties pointed out that they envisage the following steps to successfully conclude the implementation work of the Priips regulation. In order to provide a robust framework and better orientation for consumers and product providers, the original application date of the Priips regulation (December 31 2016) should be postponed for twelve months," Mr Giegold said in a statement.

The European Commission's announcement comes two months after MEPs blocked the passage of the regulation due to its requirement that three ' future performance scenarios' replace past performance charts in fund documentation.

The agreement reached will also see a fourth future projection scenario added to the Key Investor Document introduced as part of Priips, Mr Giegold added.

The original three scenarios would have meant investors were given expected future returns in 'below average', 'average', and 'above average' economic circumstances. However, parliamentarians argued this would mislead investors and was based on "optimistic results".

The new agreement will see the introduction of a 'stress scenario', aimed at informing investors of possible investment outcomes in "extreme market conditions".

Mr Giegold said: "This proposal effectively tackles the previously detected problem of over optimistic projections of future performance and will thus contribute to avoid misleading results for consumers."

The delay to implementation will allow the European Commission to take the proposals to its technical advisers in the European Securities and Markets Authority (Esma) and the European Insurance and Occupational Pensions Authority (Eiopa).

The new proposals will then again be scrutinised by the European Parliament.

Mr Giegold said: "Depending in how far the review takes into account the European Parliament's concerns, MEPs could give green light to this update in Spring 2017."

The rules will also have to approved by the Council of the EU - the EU's third legislative body alongside the Commission and Parliament  - which originally backed a delay.

The agreement brings to an end to uncertainty over the future of Priips, and alleviates fears the rules could have come into force at the end of this year without having fully approved regulatory technical standards (RTS).