The European Commission has postponed the application date of Packaged Retail and Insurance based Investment Products (PRIIPs) regulation by a year, moving the date to 1 January 2018 and aligning compliance with that of Markets in Financial Instruments II (MiFID II).
The Commission’s decision to postpone PRIIPs and the creation of associated Key Information Documents (KIDs), which are designed to improve the quality of information provided to consumers, follows uncertainty about the compliance deadline caused by a European Parliament vote in September against the Level 2 Regulatory Technical Standards (RTS) on the KIDs element of the regulation. The Economic and Monetary Affairs (ECON) Committee of the European Parliament rejected the RTS ahead of the European Parliament vote.
Announcing the new PRIIPs compliance deadline, the Commission stated: “This one-year extension is being proposed exceptionally in the interest of ensuring a smooth implementation for European consumers and to ensure legal certainty for the sector. While the Commission believes the PRIIPs regulation is sufficiently clear as well as directly applicable on its own, its objectives would be better served by having the RTS on KIDs already in place. In particular, the RTS will be important in offering consumers the benefit of having KIDs that are more easily comparable and standardised.”
The postponement gives firms more time to get ready for the complex demands of PRIIPs and aligns the regulation with MiFID II timetables, making a more strategic approach to investor protection compliance, a requirement of both regulations, a possibility.
Phil Lynch, head of markets, products and strategy at SIX Financial Information, says: “More clarity about the PRIIPs implementation timetable is welcome news to the industry. However, there is still a lot to do to prepare for PRIIPs and MiFID II simultaneously. With the timetables for both regulations now realigned and the fact that many aspects overlap, firms have an opportunity to look at compliance projects more strategically. SIX supports this approach with an industry utility that has been designed to accommodate the long-term obligations of investor protection legislation.”
John Dowdall, managing director of Silverfinch, developer of a PRIIPs compliance service, concurs, saying: “The decision to delay the introduction of PRIIPs is good news, the best part of which is that stakeholders now know the amount of time they have to prepare for the regulation after weeks of uncertainty. The postponement also allows banks, insurers and fund managers to make sure they have necessary infrastructure in place to continue to sell their full ranges of products to the investing public.”
The Commission will work the European Supervisory Authorities (ESAs) to resubmit revised RTS that meet some of the concerns raised by the European Parliament, while not compromising the balance previously achieved. In particular, the Commission has asked the ESAs to make changes to the RTS in certain areas including multi-option products, performance scenarios, comprehension alerts and presentation of insurance related costs.
The ESAs have six weeks to resubmit the revised RTS to the Commission and the RTS will then have to be adopted by the Commission before they are subject to scrutiny by the European Parliament and Council. The Commission expects the revised PRIIPs framework to be in place during the first half of 2017 and apply as of 1 January 2018.