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Tim May: Priips shows the problem with EU rule making

Following last-minute negotiations EU policymakers have agreed a final text on the packaged retail and insurance-based investment products regulation, which will be voted through at the EU Parliament next week.

The final text removes the requirement to include adviser cost information in the key information document, avoiding what trade bodies feared would be an unnecessary duplication on disclosure.

Here, the Wealth Management Association looks at how the final text was arrived at:

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We campaigned long and hard to explain the contradictions between the draft Priips legislation and the UK’s investing culture.

We won some significant victories along the way. Shares and corporate bonds are largely exempt from the requirement to produce a KID. Investments trusts and exchange-traded funds remain in scope, but we secured recognition that discretionary fund managers act on behalf of their client, and can therefore receive a KID on their client’s behalf. We gained an exemption for investment managers so they could provide a KID after a transaction, as long as the service is not offered face-to-face. We ensured DFMs would not be made liable for information supplied in the KID by the product provider.

But too much of this was agreed right at the finish, in the so-called trilogue discussions – three-way summits between the European Parliament, European Commission and Council of Ministers where final policy compromises are hammered out. This final part of the scrutiny process is the most opaque: no external observers are permitted, nor are there any published minutes of the proceedings. We are pleased at the outcome of these deliberations, make no mistake.  But it would have been better for EU policymaking if this process had taken place in plain view.

Tim May is chief executive at the Wealth Management Association 

Priips: Q&A

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When does regulation begin? 

Member states have two years from the passing of a regulation to implement it, so Priips will come into force in summer 2016.

Will the UK have discretion over how Priips is implemented? 

As Priips is a regulation and not a directive, member states must adopt the measures directly, without national discretion.

Were there any other near-misses for advisers under Priips?

European policymakers had suggested imposing a price cap on adviser fees under Priips which would have capped advisers’ hourly charges at €200 (£165). The European Parliament voted to exclude this clause last November.

Tessa Norman

 

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