Advisers need to be aware of and prepare for the impending confusion coming from the European Union. No, not Brexit but Priips: the regulation due to come into force on 31 December. It mandates a new disclosure document that product providers must create and advisers must give to clients. As a regulation, it has direct effect. It will be UK law.
However, the technical standards put to the European Parliament by the European Commission in the summer, clarifying how certain obligations would be met, were rejected, principally because the EP though the implementation timetable to tight. The EU Council has now also voted by an overwhelming majority for a delay in implementation. So the problem we have now is that there are no clarificatory standards and no one knows what will happen next.
The EC is the only body that can change the implementation date and it is not certain that it will. If it does nothing, the regulation becomes law across the EU. There is no procedure for what happens now, as it was never envisaged the EP would reject measures like these. Perish the thought it is only there to rubber stamp measures.
I understand some product providers will be able to produce the relevant Kiids in time but they may not be done in a correct manner as they will not have the relevant technical standards to follow. If there is no Kiid for a Priip product, an adviser would not be able to properly recommend that product. If a Priip did have the relevant Kiid, it would not be certain the document was correct, as cost disclosures may be required on a different basis in future. That could be interesting if a complaint is brought to the Financial Ombudsman Service.
So what next? The Commission may yet propose a delay and allow time to sort this out. We are working closely with the other trade associations to establish what the FCA will expect of firms if the regulation does come into force at the end of the year.
Regulatory certainty in terms of conduct and liability for firms will be essential, otherwise clients could be left high and dry. Advisers need to be aware of the current confusion and monitor developments.
Chris Hannant is director general at Apfa