Draft legislation for the implementation of the PRIIPs Regulation was rejected by Members of the European Parliament today. The unusual move throws doubt on the implementation timetable but does not in itself reduce industry pressure to prepare for compliance by 31 December 2016 as the timeline of the regulation remains in force. While the vote has invited speculation that delaying PRIIPs would be a natural next step, any delay would result in PRIIPs arriving as firms prepare for MiFID II. As such, today’s decision leaves no room for firms to relax their PRIIPs compliance efforts.
The European Parliament ("EP") has voted against the Regulatory Technical Standards ("RTS"), a delegated act intended to supplement the PRIIPs Regulation with detailed Level 2 legislation. The resolution to object was passed with a large majority of 602 votes to 4, on the basis that the RTS would harm the spirit and aim of the Level 1 Regulation. This vote means that the RTS as currently drafted will not enter into force.
The EP has also called on the Commission to consider postponing the application date of the Level 1 Regulation so it doesn't enter into force without the supporting RTS. Formally, the Commission may now either adopt a new delegated act (amended in consultation with the European Supervisory Authorities to take into account the objections expressed by the EP), do nothing, or propose to postpone the Level 1 Regulation.
While it seems unlikely that the Commission will opt to do nothing, the EP does not have the power to initiate a formal delay of the Level 1 Regulation or to force the Commission to postpone the date. As such, it is possible that the date of application of the Level 1 Regulation will remain as is.
The Council of the European Union has until 30 September 2016 to object to the RTS. While the objection by the EP alone is enough to prevent the RTS from entering into force, it may be that the Council also wishes to object in order to propose additional amendments to the RTS.
Nevertheless, while today's vote puts significant pressure on the Commission to decide what to do, it does not affect the Level 1 Regulation's date of legal application. The requirement to achieve compliance by 31 December 2016 remains unchanged for the time being, subject to other developments.
Philip Lynch, Head Markets, Products & Strategy at SIX Financial Information said today, “Our message to industry is clear: don’t delay in preparing for PRIIPs. While today’s vote may shed doubt on the implementation timetable, the decision does not change the significant demands that PRIIPs puts on the industry in terms of establishing data sources, connections and processes. Even in the event of a delay, we believe that compliance pressure is in no way reduced by this vote, particularly since preparing for the arrival of MiFID II already gives firms a full workload during 2017. SIX Financial Information is closely monitoring developments to ensure we stand ready to support our clients with a comprehensive understanding of what compliance means and to help them execute it.”
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