ABBL

The financial crisis has had a number of repercussions on investor confidence in the services and financial products on offer. The distribution of retail investment products (PRIPs, or Packaged Retail Investment Products) has become more and more complex and requires coherent regulation. The proliferation of distribution channels and of legal vehicles in use makes an adaptation of EU regulation necessary.

In order to offer investors transparent information tailored to their needs, legislation in the vein of the "Key Investor Information Document" (KIID) used in UCITS IV will be introduced for a vast range of other investment products. Investors will thus benefit, with certainty, from a reliable and simple source to help them differentiate between two types of investments presenting similar characteristics.

This two-page investor information document aims to:

• describe investment policies,
• fix the objectives,

• establish a history of performance,
• 
quantify costs and fees,
• establish the risk and performance profile of the fund,

• indicate where investors may find further information.

One of the European Commission’s biggest challenges lies in allowing consumers to better assess certain risks and to encompass more accurately the complexity of the legal structures of retail products that are being marketed.

The Commission, having created a working group in 2009 with a view to harmonising the distribution regime for this type of product, launched a public consultation on 26 November 2010, which closed on 31 January 2011. The ABBL actively supports this initiative (the ABBL’s response to this consultation may be downloaded below).

The European Commission will have to accomplish the considerable feat of concretising the various proposals and legislative deliberations in order to harmonise marketing regimes for the following products:

• investment funds,
• unit-linked life insurance policies,
• structured securities,
• structured term deposits.

On the basis of a single "template", investors will thus be able to:

• easily compare the various products on offer and determine their advantages and inconveniences,
• optimise their investment decisions,
• take note of potential risks,
• inform themselves on the pre-contractual terms,
• reassure themselves of fair selling practices.

This document, which describes the main characteristics of financial products, will be accompanied by complementary measures in terms of investment advice. Customers can thus benefit from suitable documentation as well as from the expertise of their adviser.

In order to ensure maximum standardisation across Europe, the issuer of the product will be entirely responsible for the publication of the PRIPs document. The distributor of the product, for his part, will be responsible for transmitting the document in question to the investor.

Work on this issue is in full progress and a draft by the European Commission is expected by summer 2011. The European Securities and Markets Authority (ESMA) will be responsible for establishing level 2 modalities.

Related files: 

Communication from the Commission on Packaged Retail Investment Products