Joint Consultation Paper concerning amendments to the PRIIPs KID

On 16 October ESAs (Joint Committee of European Supervisory Authorities) published a Consultation Paper on amending the PRIIPs KID Regulations.

This Consultation Paper (the second since PRIIPs went live in Jan 2018) proposes amendments to the PRIIPs Delegated Regulation, in response to feedback raised by industry stakeholders and associations raising a range of problems with implementing the current regulation. The main aims of the review are to:

  • Allow the inclusion of UCITS and relevant non-UCITS funds to fall within the PRIIPs regulation, ahead of the expected end of the temporary exemption (lasting to end of Dec 2021) of such funds from the requirements of the PRIIPs Regulation ;
  • Address the main regulatory issues that have been identified since the implementation of the PRIIPs KID to those products that are currently in scope.

These proposals follow a previous consultation paper of the ESAs in November 2018 (CP 2018 60), however in February 2019 the ESAs decided to defer their review and launch a public consultation on more substantive changes later in 2019.

Some notable points from the paper:

  • The paper offers stakeholders the opportunity to comment on proposed amendments to the PRIIPs Delegated Regulation
  • Feedback so far on PRIIPs has been focused on issues raised in the topics of: performance scenarios, costs, and multi-option products (MOPs).
  • Paper acknowledges that some of these  concerns expressed by stakeholders (relating to performance scenarios, costs and MOPs) might not be entirely resolvable through a change in the PRIIPs Delegated Regulation.
  • the ESAs might still consider making recommendations to change the PRIIPs Regulation in the areas such as costs, even though proposals made so far are in line with the current Regulation
  • The paper also seeks feedback from stakeholders on use of UCITS KID for professional investors, and whether the regulations hinder digital solutions and ability to extract data.

ESAs now intend to conclude their review around the end of the first quarter 2020 and submit their final proposals to the European Commission shortly afterwards

Overview of Consultation Paper (below is an abbreviated copy of the Overview on page 10 of the paper)

This consultation paper provides stakeholders with an opportunity to comment on proposed amendments to the PRIIPs Delegated Regulation.

These amendments relate to the empowerment in Article 8(5) of the PRIIPs Regulation concerning the presentation and content of the KID, including methodologies for the calculation and presentation of risks, rewards and costs within the document.

Section 4 of the consultation paper discusses changes to the presentation of performance information which are part of a parallel consumer testing exercise being conducted by the European Commission with the involvement of the ESAs.

Sections 5 to 10 discuss the nature of the proposed amendments to each of the topic areas in turn as follows:

  • Section 5 presents proposals to change the methodology for performance scenarios, including some evidence to support the approach;
  • Section 6 discusses a possible alternative to present illustrative performance scenarios;
  • Section 7 sets out how past performance information could be included in the KID;
  • Section 8 presents different options to change the methodologies to calculate costs and how these are presented in summary tables;
  • Section 9 considers possible changes in view of the exemption in Article 32 of the PRIIPs Regulation being due to expire and the possible use of the PRIIPs KID by UCITS from 1 January 2022;
  • Section 10 presents proposals to amend the rules related to PRIIPs offering a range of options for investment.

Section 11 includes an example KID relating to the proposals in Section 10.

Section 12 sets out the legislative amendments in the form of an amending RTS that would be needed for each of the proposals or options in turn.

You can read the full consultation paper on ESMA’s website here.

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