European Commission to debate PRIIPs delay on 9 November 2016

This article was updated on 26 October to reflect the the new proposed date of 9 November, in place of a previous agenda with 22 November as the likely date. This change is reflective of the document published by The College of European Commissioners.

While this point of administrative procedure does not add any new information, it does indicate that a definitive decision on PRIIPs entry in force may be made sooner rather than later. This will give much-awaited certainty to the financial industry as regards the final implementation timetable for PRIIPs.

It appears that the European Commission will consider the possibility of postponing the implementation of the PRIIPs KID regulation, but not until its forthcoming meeting on 9 November. Published in the list of items foreseen for future EC College of Commissioners meetings, the topic “Extension of entry into application of Regulation on Packaged Retail and Insurance-based Investment Products (PRIIPS)” has been put forward for discussion at its meeting on 9 November 2016.

In order to formally delay the Level 1 law, the Commission would have to propose a new Regulation with an amendment to Article 34 of the Level 1 regulation, the provision governing the date of application. This would need to be accepted by the European Parliament and European Council, and in a severely abbreviated time frame, as new laws must be published in the official journal of the EU at least 20 days before it can enter into force.

A fast response from Parliament and Council would be needed to avoid PRIIPs being applied as previously foreseen on 31 December 2016. The Parliament and Council would be expected to expedite the amendment, as neither has called for a change in the Level 1 law, only the Level 2 regulatory technical standards (RTS).

If the implementation date was to be delayed, the significant question would be for how long. Would it be delayed by 12 months to align the regulation with MIFID II (which applies from 3 January 2018)? Or by 3 to 6 months to allow PRIIPs to act as a first step for the industry to have in place before MIFID II comes into force, since MIFID II refers to PRIIP in terms of investor protection? Or maybe somewhere in the middle – for example, the head of EIOPA has called for a 9 month delay.

Any such delay would give the Commission more time to work on revised Level 2 RTS that address the concerns expressed by the Parliament (and financial industry), which resulted in rejection of the original proposal in September. In reality, this means that the financial industry would gain some time but not reduce the workload necessary to get KIDs in place, given the complexity and scale of the compliance challenge.  

It should also be borne in mind that the Commission may propose revised Level 2 RTS that are approved by Parliament and Council prior to 31 December 2016 – in which case the industry would have precious little time to digest the changes. It may be due to this possibility that the Commission will not consider postponement until its 9 November meeting.

This move by the Commission appears to indicate that they have noted calls from member states, MEPs and financial industry actors to avoid applying a Level 1 law while the supporting Level 2 RTS is still contested. However, there has been no change from the Commission's last public statement on the matter that it intends to proceed with the 31 December 2016 implementation date even in the absence of Level 2 RTS.

Therefore, even if the item is discussed at the 9 November meeting, the Commission's position may well remain unchanged. Consequently, in the intervening period until 9 November, this new update from the European legislators offers little rationale for the financial industry to slow down its preparation efforts for PRIIPs.

What is certain however, is that the financial industry is eagerly awaiting further updates from the European Commission. A decision will bring welcome and much-needed clarity to the question of PRIIPs compliance.  SIX will closely monitor developments as they happen in order to support clients with timely implementation of PRIIPs compliance measures. 

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