The European Parliament recently voted in favour of amendments to the Commission’s proposal for a regulation covering packaged retail investment products (PRIPs). The draft regulation forms part of a legislative package dedicated to strengthening consumer trust in financial markets and sets out to ensure that retail investors always receive the information they need to make informed decisions.
The draft regulation provides that a two-page easy to read Key Information Document (KID) should be given to each retail investor to help them understand and compare the key features and risks of investment products.
Material amendments to the Commission’s original proposal included:
Online fund calculator
The EBA, EIOPA and ESMA should develop an online fund calculator which would allow investors to calculate the end value of their investment after fees and costs have been taken into account.
A complexity label, for complex products which appear to be unsuitable for retail investors should appear at the top of the KID. This extra layer of transparency is intended to help consumers make an informed decision about the level of risk they are taking and help avoid the mis-selling of products.
It is expected that the draft regulation will come before European Parliament early next year for formal approval. The requirements under the draft regulation will become applicable two years after its entry into force, however UCITS will only become subject to the regulation five years after its entry into force given that they are already subject to key investor information requirements under the UCITS Directive.