Finance Watch welcomes Parliament vote on protecting retail investors, calls for KID proposal to be fast-tracked
- European Parliament supports rules for improved comparability of retail investment products
- Finance Watch welcomes this and calls on lawmakers to start KID trialogues immediately to avoid delays in implementation
Brussels, 20 November 2013 - The European Parliament today took an important step to help consumers regain confidence in financial markets, by voting in plenary to support the distribution of a Key Information Document, or KID, whenever a consumer is buying a financial investment product.
It is now up to the Council Presidency, currently chaired by Lithuania, to start trialogue negotiations as soon as possible so that this important consumer protection dossier can be completed before the European elections in May 2014.
The Parliament’s position contains many improvements over the initial Commission legislative proposal, such as a wider scope and the introduction of a complexity label, and echoes a number of suggestions made in Finance Watch’s position and discussion papers on the KID in recent months.
After the plenary vote, Finance Watch Senior Policy Analyst Frédéric Hache said:
“This piece of legislation is one of the few since the financial crisis to benefit retail investors directly. We are confident that the KID will help consumers to make informed and suitable investment decisions. This will contribute to restoring retail investor confidence in financial markets”.
MEPs supported a wide scope for the KID, so that consumers can easily compare financial products across different “asset classes” and packaging formats. They also endorsed the creation of a complexity label to warn consumers when a product they are about to buy is very difficult to understand for non-professional investors. These improvements were highly contested until the very last minute, but in the end were endorsed by a majority of MEPs in plenary.
Thierry Philipponnat, Finance Watch Secretary General, said:
“For the millions of EU retail investors, this is good news. It is essential that lawmakers now keep the momentum after today’s success: trialogues should start as soon as possible so that the regulation can be adopted before the end of this Parliament’s mandate in Spring 2014.”
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The Regulation on Key Information Documents was presented by the European Commission on 3 July 2012 and member states in the Council of the European Union adopted their position on 24 June 2013. Now that the Parliament has voted its position, trialogue negotiations can start where the three institutions will aim to reconcile the three positions. Any agreement would have to be endorsed by the last Parliament plenary session on 14-17 April 2014 or it will suffer a significant delay due to the Parliament elections in May 2014 and the appointment of a new European Commission in November 2014.
In the debate prior to the vote, Internal Market Commissioner Michel Barnier expressed his support for a wide scope in the PRIPs proposal and agreed that trialogue negotiations should start as soon as possible so that the file can be completed in the coming months.
Finance Watch welcomed the original Commission proposal in a position paper published in October 2012, “Towards suitable investment decisions?” available at http://www.finance-watch.org/our-work/publications/201 . In this paper, we advocated improvements in the scope of the regulation, product design rules, disclosure of the impact of investments on the real economy, a removal of the summary risk indicator, and the disclosure of manufactured margins in structured products.
To contribute to the debate in Parliament and Council about the desirability of adding product design rules or a complexity label, Finance Watch published in April 2013 a “Discussion paper on product rules for retail investment products”, available at http://www.finance-watch.org/our-work/publications/627. The paper studies different national regimes and identifies product features that frequently lead to mis-selling and consumer detriment. In the opinion voted today, the European Parliament chose to require that such products clearly display a “complexity label”.