What changed between the draft committee report and the plenary report

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

7 unchanged paragraphs

on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) No 1286/2014 as regards the modernisation of the key information document

(COM(2023)0278 – C90180/2023 – 2023/0166(COD))

(Ordinary legislative procedure: first reading)

The European Parliament,

– having regard to the Commission proposal to Parliament and the Council (COM(2023)0278),

– having regard to Article 294(2) and Article 114 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C90180/2023),

– having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

Added:– having regard to the opinion of the European Economic and Social Committee of 25 October 2023,

– having regard to Rule 59 of its Rules of Procedure,

Changed:– having regard to the report of the Committee on Economic and Monetary Affairs (A90000/2023),(A9-0160/2024),

1. Adopts its position at first reading hereinafter set out;

2. Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

Changed:3. Instructs its President to forward its position to the Council, the Commission and the national parliaments;parliaments.

Change 1

Removed:Recital 2 a (new): (2a) The purpose of this Regulation is to cover packaged products that are manufactured by the financial services industry in order to provide additional investment opportunities to retail investors. Non-equity securities issued by non-financial issuers contribute to the financing of corporate issuers and, where they are offered to retail investors, will be subject to the obligation to draw up a prospectus, which includes a summary, thus providing retail investors with adequate pre-contractual information. These securities should be excluded from the scope of this Regulation. The current requirement to produce, review and update a key information document for such non-equity securities, until their maturity, encourages issuers to restrict them to professional investors only, thus depriving retail investors of investment options. Addressing non-equity securities issued by non-financial issuers will therefore remove this incentive and might encourage retail investors’ participation in Union capital markets, while offering those retail investors with more opportunities to diversify their financial portfolios.

Added:AMENDMENTS BY THE EUROPEAN PARLIAMENT*

Removed:All types of non-equity securities issued by non-financial issuers should be carved out of the PRIIPS scope. These securities (e.g. floated rate notes, convertible bonds, sustainability-linked bond) fall under the definition of packaged products, which leads issuers to systematically forego offering them to retail investors, while they are already covered by the Prospectus Regulation, which foresees a summary. By removing its administrative burden, it is possible to foster retail investment in products that have a direct contribution to the financing of these issuers.

Added:to the Commission proposal

Removed:Recital 5 a (new): (5a) As the scope of financial products covered by this Regulation is very wide, the methodologies developed under this Regulation to standardise the presentation of key items of the key information document, such as performances or risks, may sometimes face a trade-off between comparability and comprehensibility of the information provided to retail investors. It should therefore be clarified that comprehensibility should always prevail over the aim to achieve comparability, and that calculation methodologies, while they should be homogeneous for families of products displaying similar features, may differ between categories of products covered by this Regulation which are intrinsically different (such as investment funds and structured products).

Added:---------------------------------------------------------

Removed:The Joint Committee’s Advice of 29.04.2022 highlighted that the comprehensibility of the information for retail investors can sometimes be jeopardized by taking a uniform approach for the sake of comparability. Without giving up on the overarching aim of comparability between substitutable products, it should be possible to allow additional differentiation in how rules apply to different types of products. The current approach often prevents ESAs to adopt methodologies in the Level 2 for certain families of products that would benefit retail investors.

Added:2023/0166 (COD)

Removed:Regulation (EU) No 1286/2014

Added:Proposal for a

Removed:Article 1 – paragraph 1 – point 1 – point a a (new), Article 2 – paragraph 2 – subparagraph d a (new): (aa) the following point is inserted: / ‘(da) non-equity securities which are issued by non-financial issuers and for which a prospectus is established pursuant to Regulation (EU) 2017/1129’;’

Added:REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

Removed:Non-equity securities issued by corporates to finance themselves should be exempted from the PRIIPs regulation. The current requirement to produce a KID desincentivises issuers from extending their offer of such non-equity instruments to retail investors, even more so given that these securities are often covered by the Prospectus Regulation (which foresees a summary).A distributor that would nevertheless wish to propose these bonds to retail clients would face high administrative burden due to the product governance rules.

Added:amending Regulation (EU) No 1286/2014 as regards the modernisation of the key information document

Removed:Regulation (EU) No 1286/2014

Added:(Text with EEA relevance)

Removed:Article 1 – paragraph 1 – point 3 – point a a (new), Article 4 – paragraph 1 – point 5: (aa) point 5 is replaced by the following: / "(5) ‘PRIIP distributor’ means a person advising on, offering, selling or concluding a PRIIP contract with a retail investor;"

Added:THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Removed:(32014R1286)

Added:Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof,

Removed:The PRIIPs Regulation currently uses specific wordings which do not correspond to those used in other pieces of legislation governing distribution of financial and insurance products (IDD, PEPP and MiFID). To ensure consistency across the different legal acts, we suggest to replace ‘person selling a PRIIP’ by ‘PRIIP distributor’.

Added:Having regard to the proposal from the European Commission,

Removed:Regulation (EU) No 1286/2014

Added:After transmission of the draft legislative act to the national parliaments,

Removed:Article 1 – paragraph 1 – point 3 – point b, Article 4 – paragraph 1 – point 7a: (7a) ‘electronic format’ means electronic format as defined in Article 4, point (62a), of Directive 2014/65/EU;

Added:Acting in accordance with the ordinary legislative procedure,

Removed:To ensure consistency across the different legal acts governing distribution, a reference to article 4(62) MiFID II and to article 2(18) IDD is added. Doing so, it will also specify that a PDF is deemed valid.

Added:Whereas:

Removed:Regulation (EU) No 1286/2014

Added:(1) A core objective of the Capital Markets Union (CMU) is to ensure that consumers can fully benefit from the investment opportunities offered by capital markets. To be able to do so, consumers must be supported by a regulatory framework that empowers them to take investment decisions that correspond to their needs and aims and adequately protects them in the single market. The package of measures under the EU Retail investment strategy seeks to address the identified shortcomings, including those in the area of information available to retail investors.

Removed:Article 1 – paragraph 1 – point 3 a (new), Article 5 – paragraph 1: (3a) in Article 5, paragraph 1 is replaced by the following : / "1. PRIIP manufacturers shall be required to draw up and publish on their website a key information document in accordance with the requirements of this Regulation where the PRIIP is intended to be advised, offered or sold to retail investors."

Added:(1a) The Capital Markets Union (CMU) will only achieve its goals if citizens understand what it entails and, to that end, it is essential to guarantee high levels of financial literacy and investor protection. Levels of financial literacy differ significantly across Member States and Union legislation is necessary to ensure that access to the financial markets is facilitated not only through proportionate and clear rules, but also by concrete steps towards simplification.

Removed:(32014R1286)

Added:(2) Article 4, point (1), of Regulation(EU) No 1286/2014 defines packaged retail investment products or ‘PRIPs’ as investments where, regardless of the legal form of the investment, the amount repayable to the retail investor is subject to fluctuations because of exposure to reference values or to the performance of one or more assets that are not directly purchased by the retail investor. The ability for the manufacturer to redeem the investment early by triggering a make-whole clause should not in itself be considered as such a fluctuation. That fact should be reflected in the definition of PRIPs.

Removed:Proposal to replace ‘made available to retail investors’ with a more straightforward drafting.

Added:(3) In the case PRIIPs offer the retail investor a range of options for investments, the information on those various options may be contained in different documents. That makes it difficult for retail investors interested in purchasing such PRIIPs to identify the total costs of the PRIIPs. It is therefore necessary to provide retail investors with tools, including simulation tools, to access and compare the total costs of such PRIIPs before they select one particular investment option. More detailed rules to use of these tools should ensure better visibility of the total costs of these products while allowing a certain degree of flexibility when using simulation tools.

Removed:Regulation (EU) No 1286/2014

Added:(3a) The Key Information Document (KID) aims to ensure comparability between PRIIPs. So far, it has been difficult for retail investors to compare PRIIPs by using the KID. Retail investors should however be able to easily access reliable and independent sources of information, in order to be able to make informed investment decisions on the basis of a comprehensive comparison of the different investment options available in the Union. While online tools already exist in some Member States, their availability varies among Member States. It is therefore necessary to enable ESMA and EIOPA to develop an independent Union online comparison tool, based on key information document data that will be available under the European Single Access Point. This should allow retail investors to compare products, provided that they are comparable. The comparison tool should allow the retail investor to filter categories of products by Member State. A link to this tool should be disclosed in the KID once the tool is available. This tool should facilitate the participation of retail investors in capital markets as it would provide them with a more convenient, transparent and reliable source of information regarding all the relevant qualitative features, costs, risk and return on investment of each commercialised product.

Removed:Article 1 – paragraph 1 – point 4, Article 6 – paragraph 3 – introductory part: 3. By way of derogation from paragraph 2, where a PRIIP offers the retail investor a range of options for investments, such that all information required in Article 8(3) with regard to each investment option cannot be provided within a single, concise stand-alone document, the key information document shall provide a generic description of the investment options, and the costs of the PRIIP other than the costs for the investment option, provided that:

Added:(4) Retail investors increasingly seek information on the sustainability performance of investment products, including PRIIPs. Recent Union legislative acts have introduced several disclosure obligations that could be leveraged to inform retail investors, in particular Regulation (EU) 2019/2088 of the European Parliament and of the Council and Regulation (EU) 2020/852 of the European Parliament and of the Council. Such disclosures may, however, not be sufficiently visible to retail investors. It is therefore necessary to add certain information about the sustainability profile of PRIIPs to the key information document. To avoid additional reporting costs, that ESG information should be taken from the disclosures provided by product manufacturers pursuant to Regulation (EU) 2019/2088 and Regulation (EU) 2020/852.

Removed:For PRIIPS that offer a range of options for investment, it is necessary to distinguish between the wrapper of the product, the investment options and the underlying asset backing these investment options.

Added:(4a) In order to avoid undermining the comprehensibility and meaningfulness of the information, the ESAs should allow for more flexibility in their recommendations on the nature of the information to be provided in the performance section of the KID. In the majority of cases, the KID should include forward-looking performance scenarios. However, in a limited number of cases, when such scenarios could be misleading, past performance should be included in the KID for relevant PRIIPs.

Removed:Regulation (EU) No 1286/2014

Added:(5) Increased digitalisation provides opportunities to modernise and simplify the provision on making PRIIPs KIDs available by establishing a preference for KIDs to be provided in electronic format, while clarifying that the client may request a paper version of the PRIIPs KID free of charge. For the purposes of this Regulation, a website that fulfils certain requirements could be considered as a durable medium. Increased digitalisation also provides opportunities to present key features of PRIIPs in a more attractive way. Regulation (EU) No 1286/2014 does not, however, provide sufficient flexibility for the use of digital means for displaying key information to investors such as presenting information from PRIIPs key information documents in a layered way and in a personalised manner that would reduce the visual overload of retail investors and facilitate their understanding of the PRIIP concerned. It is therefore necessary to introduce more flexibility in the use of the electronic format so that investors can fully benefit from the potential offered by the provision of a key information document in an electronic format, including by customising the amount they wish to invest or the holding period, according to their preferences. That personalisation does not imply an assessment by the PRIIPs provider of the individual characteristics of the potential retail investor. The three-page key information document should always be drawn up in accordance with Article 8 and available on the manufacturer's website. However, the key information it contains could be provided to retail investors in a flexible and personalised way, as long as retail investors are informed that they can download the complete key information document.

Removed:Article 1 – paragraph 1 – point 4, Article 6 – paragraph 3 – point a: (a) PRIIPs manufacturers provide investors with tools adapted to retail investors that facilitate research and comparison among the different investment options, including on costs and performance, and taking into account the costs of the PRIIP that do not relate to its investment options;

Added:(6) The European Securities and Markets Authority, the European Banking Authority and the European Insurance and Occupational Pensions Authority (the ‘ESAs’) should develop the draft regulatory technical standards as regards the content of the dashboards and the principles for the use of layering and digital options using an electronic format. The Commission should adopt those draft regulatory technical standards, or further amend them, by means of delegated acts pursuant to Article 290 TFEU and in accordance with Articles 10 to 14 of Regulations (EU) No 1093/2010, (EU) 1094/2010 and Regulation (EU) 1095/2010 of the European Parliament and of the Council.