Before signing a contract, all small (non-professional) investors should be given three-page A4 standard format KIDs to help them to understand and compare packaged retail and insurance-based investment products (PRIIPs), estimate the total cost of their investment as well as be aware of its risk-reward profile. KIDs should be clearly separate from advertising materials, consistent with any binding contractual documents and prepared by a clearly identifiable entity that created the product.
Parliament's negotiators ensured that where applicable investors will also be informed whether their investment will contribute to any projects with environmental or social aims.
The new rules would apply to all investment products intended for small investors. However, they would not apply to: non-life insurance products, life insurance contracts where the benefits under the contract are payable only on death or in respect of incapacity due to injury, sickness or infirmity, or deposits other than structured deposits and securities.
Officially recognised pension schemes, pension products which, under national law, are recognised as having the primary purpose of providing the investor with an income in retirement and individual pension products for which a contribution from the employer is required would also be exempted from the scope of the legislation.
KIDs must not be misleading. If a small investor could show that a loss was caused by the information in a KID, or was inaccurate or inconsistent with any binding contractual documents, then the investment product manufacturer could be liable under national law.
To take effect, the new rules must be approved by Parliament as a whole during the April II plenary session and subsequently endorsed by the member states.
ECON- press release
Michel Barnier, Commissioner for the Internal Market and Services, comments: "European consumers need a clear and understandable explanation on how they invest their savings. Too often, retail investors have been caught out due to a lack of basic information being provided before an investment is made. I am encouraged to see that the European Parliament and the Council agree and support the Commission on a mandatory Key Investor Information Document that has to be supplied to all retail investors before they take the decision to invest in a financial product. The broad coverage of the Key Information Document aims to ensure that no investment product slips through the net and that the consumer can compare different investment proposals. This measure is essential to restore consumers' confidence in the financial sector."
Full statement
Insurance Europe
Insurance Europe welcomes the exclusion of pension products from the scope of the regulation. Pension products are neither investment products nor comparable with them, because they are specifically purchased to provide an income for retirement. Consumers therefore need personalised information to make informed decisions about which pension product to purchase.
Insurance Europe strongly supports a high level of consumer protection and believes improving the information provided to consumers is key. It remains to be seen whether the final PRIIPs Regulation as agreed by the trialogue parties will fulfil this aim.
The standardised "key information document", as proposed in the PRIIPs Regulation, should be a useful tool for empowering consumers by both educating them and allowing them to compare investment products more effectively. However, it should not simply be a case of more information, but rather better information for consumers.
Insurance Europe remains, therefore, very concerned about the duplication of information requirements between the Solvency II Directive and the PRIIPs Regulation, and the resulting information overload for consumers.
Press release © Insurance Europe
© European Parliament
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