EUROPE: ESAs Consult on Changes to the Key Information Document for PRIIPs

Thursday October 17 2019

On 16^th October 2019, the European Supervisory Authorities (ESAs) have issued a Consultation Paper on amendments to existing rules underpinning the Key Information Document (KID) for Packaged Retail and Insurance-based Investment Products (PRIIPs).

The aims of the review are to:

• Address issues that have been identified by stakeholders and supervisors since the implementation of the KID in 2018;
• Make specific changes to allow the rules to be applied to investment funds that are expected to have to prepare a KID from 1 January 2022 onwards.

The Consultation Paper proposes amendments to the PRIIPs Delegated Regulation. The main aims of the review are to:

• Allow the appropriate application of the PRIIPs KID by UCITS and relevant non-UCITS funds, subject to the potential end of the temporary exemption 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.

The consultation paper proposes changes relating to the following topic areas:

• Illustrations of what the retail investor might receive in return from their investment (performance scenarios);
• Information on what the costs of the investment are;
• Specific issues for different types of investment funds;
• Specific issues for PRIIPs offering a range of options for investment (so-called “Multi-Option Products”).

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

Preliminary analysis of the expected costs and benefits of the proposed amendments is also included in the consultation paper (in Section 13), in order to gather feedback on possible costs and benefits of the proposals and the relative scale of these costs and benefits for different stakeholders

As part of this review, the European Commission, in cooperation with the ESAs, is undertaking a consumer testing exercise to assess the effectiveness of different presentations of performance scenarios. The results are expected in the first quarter of 2020.

When deciding on their final proposals, the ESAs will take into account the feedback from respondents to this consultation, as well as the results of the consumer testing exercise.

The deadline for submission of feedback is 13 January 2020.

Click here for Consultation Paper

Click here for template for comments.

Click on the link above for further information.