The Priips regulations, which are currently due to be implemented on 1 January 2017, will require a Key Information Document (KID) to be provided to consumers before they buy an investment product.
The MEPs sitting on the Economic and Monetary Affairs Committee of the European Parliament were concerned that these investment disclosures, so called Level 2 requirements, could mislead retail investors.
The rules, which have attracted much criticism from various associations, including Ailo and Fecif, will apply to investment companies and most retail investment products in Europe excluding Ucits.
The committee’s rejection may be repeated when all MEPs are asked to approve these rules later this September.
No definitive guidance
In early reaction to the vote, Ian Sayers, chief executive of the Association of Investment Companies (AIC) said: "The deadline for the implementation of Priips is only a few months away and will apply to thousands of different investment products across the EU.
"But as yet there is no definitive guidance on what the KID should contain. It would be far better to take some extra time to get the detailed rules right rather than stick to an arbitrary timetable and risk misleading the very consumers these rules are designed to help.”
Syed Kamall, the European conservatives and reformists (ECR) chairman and London MEP, said the committee would have preferred not to have taken this drastic step, but it had been "hitting its head against a brick wall" with the European commission.
"This is not a political decision. A cross-party group of MEPs has come together to say that technical standards need to be accurate. The commission has dismissed all opposition as industry lobbying but the industry also contains fund providers who support the principle of this legislation but have legitimate concerns. We have a responsibility to listen and question all parties involved."
He added: "The commission now needs to realise that we are serious about demanding they get this right. We are not rejecting the principles behind this regulation, as clear and accurate guidance to investors is crucial. However, we want legislation that will deliver, not tokenistic legislation that is more concerned with meeting a deadline than protecting consumers."