EUROPE: European Commission Adopts Delegated Regulation on PRIIPs

Wednesday September 8 2021

On 7^th September 2021, the European Commission adopted the Delegated Regulation amending the regulatory technical standards (RTS) set out in Commission Delegated Regulation (EU) 2017/653 laying down the regulation on the key information document (#KID ) of packaged retail investment products and insurance-based investment products (#PRIIPs ).

The regulatory technical standards developed by the European supervisory authorities and laid down in Commission Delegated Regulation (EU) 2017/6535 should specify:

• the presentation and the content of the KID, including methodologies for the calculation and presentation of risks, rewards and costs within the KID (Article 8(5) of Regulation (EU) No 1286/2014),
• the review, revision and publication of the KID (Article 10(2) of Regulation (EU) No 1286/2014); and
• the conditions for fulfilling the requirement to provide the KID in good time to the retail investor (Article 13(5) of Regulation (EU) No 1286/2014).

This delegated regulation amends Delegated Regulation (EU) 2017/653 on regulatory technical standards by setting out, in particular:

• new methodologies underpinning the calculation of appropriate performance scenarios and a revised presentation of these scenarios, to ensure that retail investors do not have inappropriate expectations about the potential return on investment they may receive;
• revised summary cost indicators and changes to the content and presentation of information on the costs of PRIIPs to help retail investors better understand the different types of cost structures, as well as to facilitate the use of this information by persons selling or advising about PRIIPs;
• a modified methodology underpinning the calculation of transaction costs to address practical challenges that have arisen when applying the existing rules and issues regarding the application to certain types of underlying investments;
• modified rules for PRIIPs that offer a range of options for investment to ensure more clarity of the information on their cost implications.

The delegated regulation also lays down regulatory technical standards for information on past performance, which is to be provided by certain types of undertakings for collective investment in transferable securities (UCITS), retail alternative investment funds (AIFs), and insurance-based investment products.

The delegated regulation is accompanied by amendments to Directive 2009/65/EC to avoid, from 1 July 2022, that investors receive two pre-contractual disclosure documents, i.e. the PRIIPs KIDs and the ‘key investor information’ required by that Directive. This will be achieved by clarifying that if UCITS already draw up, provide, revise and translate KIDs, the requirements on ‘key investor information’ as set out in Articles 78 to 82, and Article 94 of that Directive are consequently satisfied.

This delegated regulation is also accompanied by amendments to Regulation (EU) No 1286/2014 to extend the transitional arrangement for certain investment funds laid down in Article 32 of that regulation by six months, i.e. to 30 June 2022. The delegated regulation also lays down a transitional arrangement under Delegated Regulation (EU) 2017/653 that is consistent with the extended transitional arrangement in Regulation (EU) No 1286/2014. It allows manufacturers of PRIIPs that offer investment funds as the only underlying investment options, or alongside other investment options, to continue using, for the purposes of drawing up PRIIPs KID, UCITS ‘key investor information’ documents drawn up in accordance with Articles 78 to 81 of Directive 2009/65/EC in respect of such funds.

The delegated regulation applies from 1 July 2022.

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