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28 May 2013

Finance Watch: Discussion paper in the context of the PRIPs regulation proposal

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Finance Watch published a discussion paper, 'Product Rules for Packaged Retail Products: Why, When, How?' Based on existing product regulations, Finance Watch proposes a set of six principles which could be used either for banning detrimental features or for a warning label on the KID.

Key points:

  • The large number of financial product mis-selling cases in EU Member States is evidence that intervening at the point of sale is not always sufficient, and that it is preferable for all stakeholders to intervene earlier and prevent consumer detriment before it occurs rather than after.
  • As a significant portion of mis-selling cases is related to product failure, this requires in Finance Watch's view action targeted at this specific issue such as product design rules, within product governance.
  • The success of UCITS is evidence that a sound framework is valued by retail investors and that product investment rules do not have an adverse impact on choice and innovation.
  • Existing Member States product rules share a common purpose, and their tried and tested principles have significant overlaps. This should facilitate agreeing on a set of common principles without delaying the PRIPs file.
  • Based on existing product regulations, Finance Watch proposes a set of six principles. Such principles could be used either for banning detrimental features alternatively for a warning label on the KID. We believe that these principles would have prevented many of the recent mis-selling cases.
  • Since such rules are not related to advice but to product design, and also in order to be consistent with UCITS, Finance Watch is convinced that PRIPs is the place to introduce them. UCITS includes indeed not only a KIID but also product investment rules. These rules are complementary to MiFID product intervention supervisory measures, and product design rules within PRIPs should similarly be a useful complement to MiFID product intervention measures.
  • Finance Watch believes that PRIPs is an unmissable opportunity to get it right with investor protection
    and to address mis-selling issues meaningfully.

Press release

Discussion Paper

© Finance Watch

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