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The Regulation of PRIIPs: Great Ambitions, Insurmountable Challenges?

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  • Veerle Colaert

Abstract

The Regulation on key information documents for packaged retail and insurance-based investment products (‘PRIIPs Regulation’) purports to deal with two important concerns in the field of investor protection: (i) investors do not read, understand, or digest extensive and/or technical information; and (ii) they hardly compare the products and services of different financial institutions.The first concern relates to the long-established problems of information overload and rational ignorance. The PRIIPs Regulation tackles those problems by introducing a short information document, which uses clear, succinct and understandable language and visual indicators supporting the content of the document.The second concern relates to the fact that information documents are often hard to compare in view of their different formats. Standardization is an obvious answer to this problem. The use of standardization, however, depends on the question whether its scope of application is sufficiently wide to cover all comparable products. The PRIIPs Regulation is innovative in this respect, being the first piece of ‘horizontal’ or ‘cross-sectoral’ legislation in the history of EU financial regulation—covering banking, investment, and insurance products, instead of limiting its scope of application to one of these sectors.Although the PRIIPs Regulation deals with very concrete investor protection concerns and should therefore be supported as a significant improvement, it also raises a number of important concerns, challenges, and criticisms.This contribution situates the PRIIPs Regulation in its law and economics and behavioural finance context and offers a critical analysis of its benefits, drawbacks, and—seemingly insurmountable—challenges.

Suggested Citation

  • Veerle Colaert, 2016. "The Regulation of PRIIPs: Great Ambitions, Insurmountable Challenges?," Journal of Financial Regulation, Oxford University Press, vol. 2(2), pages 203-224.
    • Handle: RePEc:oup:refreg:v:2:y:2016:i:2:p:203-224.
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    File URL: http://hdl.handle.net/10.1093/jfr/fjw009
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    Cited by:

    1. P. Münchhalfen & R. Gaschler, 2021. "Attention Distribution of Current Key Investor Documents: Standardization as a Long-Term Goal of the PRIIP Regulation," Journal of Consumer Policy, Springer, vol. 44(1), pages 73-94, March.
    2. Thorp, S. & Bateman, H. & Dobrescu, L.I. & Newell, B.R. & Ortmann, A., 2020. "Flicking the switch: Simplifying disclosure to improve retirement plan choices," Journal of Banking & Finance, Elsevier, vol. 121(C).
    3. Baule, Rainer & Münchhalfen, Patrick & Shkel, David & Tallau, Christian, 2023. "Fair-washing in the market for structured retail products? Voluntary self-regulation versus government regulation," Journal of Banking & Finance, Elsevier, vol. 148(C).

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