EU Commission brings forward PRIIPS delay debate

The European Commission will potentially delay the introduction of new rules affecting private equity firms with high net worth investors, just seven weeks before it is due to enter into force.

The commission will debate the delay on November 9. More than 20 EU member states have already called for a one-year postponement to the Packaged Retail and Insurance-based Investment Products regulation, currently penned for 31 December, because there are no official guidelines for compliance with the regulation.

Proposed guidelines, known as regulatory technical standards, were overwhelmingly rejected by the European Parliament in September.

The debate on the delay was originally scheduled to take place on 22 November, but was brought forward following widespread criticism that it was timed too close to the scheduled entry into force of the regulation.

Informed decision

Under the regulation, every packaged product providing exposure to an underlying instrument sold to retail investors must have an accompanying key information document. The purpose of the KID is to allow investors to compare products.

Private equity firms whose clients include high net worth individuals will have to prepare KIDs because such investors qualify as retail investors under the Markets in Financial Instruments Directive.

Those firms whose funds are sold through life insurance policies to retail investors will also be affected, but to a lesser extent; managers of these funds will have to provide risk, performance and cost data to insurance companies which will then be responsible for produce the KID.

The European Parliament’s Committee on Economic and Monetary Affairs rejected the regulatory technical standards, prompting the landslide vote against them, because the proposed methodology for calculating future performance did not provide information which is fair, accurate and not misleading.

In some cases, it said, the methodology does not inform investors they could lose money.