LONDON, Sept 1 (Reuters) - European Union lawmakers rejected new rules for selling life insurance, funds and other retail financial products on Thursday, saying they risked misleading people.
The proposed law forces insurers, banks and financial advisers to use a standard “key information document” or KID and covers an often nationally-based market dominated by mutual funds which was worth 9 trillion euros ($10 trillion) in 2009.
But in a sign of how the European Parliament is becoming more willing to assert itself, its economic affairs committee voted by 55 to 0 to reject the rules, which flesh out a law known as “PRIIPs” that comes into force on Dec. 31.
A KID document must not be more than three sides long and use jargon-free language to show potential future performance of the product, and total costs. The aim is to make it easier to compare products across the EU financial sector for the first time to encourage competition and drive down costs.
Sven Giegold, a German Green Party member of the committee, said that even under the unfavourable future performance scenario set out in the rules, consumers could expect a profit.
“I don’t want to deter people taking risks... but people must know that when they take a risk they can lose money.”
Lawmakers typically focus on primary lawmaking, leaving technical implementing rules like those rejected on Thursday to the European Commission and regulators, who formulate them.
John Berrigan, a senior official at the European Commission, which authorised the rules, said he was confident the rules meet the needs of investors.
“These are important steps in improving investor protection and should be put in place as soon as possible,” he told the committee.
“We are not in favour of moving the deadline.”
As a “second best” option, the law could still be introduced as planned in January without the rules, Berrigan added.
The financial industry has been pressing for more time to get ready for PRIIPs given the major change it represents and the resolution approved by lawmakers called on the commission to consider postponing the start date, and not go ahead if the rules have not been changed.
The law will need the backing of the full parliament to come into force and lawmakers hope the commission and regulators will make changes and keep timelines for it on track. ($1 = 0.8969 euros) (Editing by Alexander Smith)