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Corporate bonds exempt from Euro disclosure rules

New European rules on disclosing investment costs to clients will not apply to corporate bonds after an exemption was granted in negotiations last week.

European negotiations on the packaged retail investment products regulation, or Prips, are now entering their final stages. A key proposal of the regulation is the key information document, which aims to make costs and product details clearer for investors.

At the first trilogue discussion session, held last week, EU policymakers agreed to remove corporate bonds from the scope of Prips.

The Wealth Management Association has been lobbying for the change as it argues that a KID document would be inappropriate for corporate bond investors given that they already have access to a short form prospectus and other information documents.

The next trilogue discussion is scheduled for 11 March, after which a date will be set for the third and final session.

Trade bodies are lobbying for a number of further changes before the discussions end, including the removal of adviser information from the KID.

WMA deputy chief executive John Barrass says: “There would have been no benefit to the investor in including corporate bonds in the rules governing KIDs for Prips.

“Bonds are important in helping the EU’s major businesses to access the finance they need to secure the economic recovery, and distributing a KID to retail investors for every bond issue they could access could have stifled the market.

“We believe the trilogue meeting arrived at the right decision, and we hope the remaining trilogues deal with the outstanding inconsistencies. As it stands, for instance. exchange-traded funds and investment trusts may still need to have a KID distributed prior to every trade, which slows down trading, reduces liquidity, and damages the prospects for achieving the desired price and best execution for retail clients.”

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