The European Structured Investment Products Association (EUSIPA) has issued its preliminary response to proposals published by the European Commission (EC) on 3 July for regulating packaged retail investment products (PRIPs).
EUSIPA said that, in general, it welcomes the general idea behind the proposals for standardised legal requirements for the distribution of financial products to retail customers. It added the following comments:
- EUSIPA believes that a framework for the proposed key information document (KID) deemed to summarise the features of a product, including its risk profile, benefits market transparency and helps to ensure comparability across different financial products.
- As many of its national member associations, notably Germany’s Deutsche Derivate Verband (DDV), have for several years been establishing key information material for retail investors, EUSIPA wants the relevant EU law-making institutions to take account of existing best-practice examples going forward.
- It is concerned that some requirements relating to the content of the KID risk making the document overly detailed, and run counter to the original intended purpose of the material. There is also the possibility of there not being a clear distinction between the KID and other product-related information material. EUSIPA is keen to stress the importance of harmonising the KID requirements with other disclosure documents already required under different national regimes for retail product distribution in the EU, such as Italy’s Scheda Prodotto.
- It isalso very concerned that the proposed reversion of the burden of proof, in relation to damage claims following the use of the KID document, could create a significant incentive for unwarranted litigation by investors while also putting an unfair burden on product manufacturers.
“As much as we support harmonising the distribution of financial retail products in the EU, we are concerned that the proposed regulation overshoots original intentions,” said EUSIPA’s secretary general, Thomas Wulf. “It runs the danger of amassing a large amount of information on what should be a short and clear document. Neither do we support the creation of a potential new market for litigation, which will benefit lawyers but will not benefit customers.”