The draft regulatory technical standards (RTS) on the key information document (KID) for packaged retail and insurance-based investment products (‘PRIIPS’), which are expected to be published soon, are likely to cause further turmoil in the European Parliament.
In a letter to the chairs of the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA) on Wednesday 8 April, MEPs Sven Giegold (Greens/EFA, Germany), Jonás Fernández (S&D, Spain) and Sirpa Pietikäinen (EPP, Finland) expressed their concerns about the draft texts.
The KID document aims to provide non-professional investors with key information on the performance of retail financial products in the form of a three-page summary written in a comprehensible manner, so that the investor can compare different products and make an informed choice.
The ‘PRIIPS’ regulation requires the issuer to provide future performance scenarios in the KID. “This provision is the result of Parliament’s longstanding position and careful consideration”, the MEPs said. However, the RTS drafts by the two authorities instead reportedly propose two historical scenarios.
“Unlike future performance scenarios, which show a range of potential outcomes, past performance indicators tend to lead investors to extrapolate past performance directly into the future, which is misleading”, they explain. A problem which, according to them, has been underlined by the COVID-19 crisis.
MEPs want at all costs to avoid “any further instances of regrettable differences between the European Parliament and the European Supervisory Authorities”, referring to Parliament’s rejection of implementing measures on the KID in the past (see EUROPE 11624/14).
Nevertheless, they warn that “any proposals running against the compromise established by the co-legislators would delay the agreed timeline and ultimately put the overall objective of PRIIPS at risk”.
See the letter: https://bit.ly/2JNHW9P (Original version in French by Marion Fontana)