The European Commission’s decision delay to the introduction of the Packaged Retail and Insurance-based Investment Products rules has been welcomed.
The delay'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.
European Commission Vice-President Valdis Dombrovskis, responsible for financial stability, financial services and capital markets union said the delay would “ensure legal certainty and a smooth implementation for consumers”.
Chris Cummings, chief executive of the Investment Association, welcomed the decision.
He said: “The draft rules, that were rejected by the European Parliament in September, would have led to extremely flawed and misleading retail investor disclosure.
“The additional time should mean that regulators and legislators are able to take a step back and design a Priip key information document that provides consumers with better disclosure than the current draft rules permit.
“It is now time to get it right, and for the Commission to amend the presentation of costs and charges and improve the performance disclosure by adding historic performance alongside future scenarios.”
He said the industry would need certainty, so called for the Commission to come up with new proposals by early 2017.
Mr Cummings’s German counterpart, Thomas Richter, the chief executive of Germany’s investment funds association the BVI, also welcomed the decision.
He said: “The delay will allow enough time for product providers to implement the regulatory technical standards for the information documents.”
Mr Richter said one of the key areas, which still requires work is the calculation method for transaction costs incurred by investment funds.
He said: “According to the current calculation method, a large number of funds would have to disclose negative transaction costs in the Priips KID.
“This would be absurd and could be misleading to investors if read that the transactions in the portfolio would earn additional returns.
“On the basis of such calculations, the key information document would become a disinformation document for investors, defeating the point of the legislation.”
Steven Cameron, pensions director at Aegon UK, also welcomed the news.
He said: “From a UK perspective, while there’s always scope for improvement, we believe existing FCA disclosure documents provide more meaningful tailored information, to both the adviser as well as the consumer, than the proposed key investor document content.
“The key information document is now due to go live in January 2018, and as the UK will still be in the EU at that point, those products in scope will need to be compliant by then.
“We hope all parties will take the opportunity to step back and address the concerns raised to ensure the key investor document is a help, not a hindrance, to customer understanding.”
Chris Hannant, director general of the Association of Professional Financial Advisers, said delaying Priips was "the only sensible option" given the timescale for the measures.
He said: "I still think there are some problems with the calculations and the fact they don't match with Mifid II. From an adviser's perspective there will be obligations to plain this mismatch."
damian.fantato@ft.com
