Outcome of European Supervisory Authorities’ Review of PRIIPs Technical Standards Published

The Joint Committee of the European Supervisory Authorities has published a letter addressed to the European Commission informing it of the outcome of the ESAs’ review of the Regulatory Technical Standards (Commission Delegated Regulation (EU) 2017/653) on the presentation, content, review and revision of a standardized “key information document” and the conditions for fulfilling the requirement to provide a KID. The RTS supplements the Packaged Retail and Insurance-based Investment Products Regulation, which introduced a requirement for manufacturers of PRIIPs to produce a KID with the intention of improving retail investors’ understanding of the financial products they were purchasing.

The ESAs’ letter concerns their review of the key regulatory issues identified since the implementation of the KID, in particular the information on performance and costs and on measures to enable the appropriate application of the KID by Undertakings for Collective Investment in Transferable Securities. The ESAs consulted in late 2019 and early 2020 on amending the PRIIPs RTS and, taking feedback received into account, the ESAs have prepared draft RTS to amend the PRIIPs RTS. However, the ESAs are unable to formally submit their final report and final draft RTS to the Commission because the Board of the European Insurance and Occupational Pensions Authority did not approve with qualified majority all of the proposals. The Boards of the European Banking Authority and the European Securities and Markets Authority both approved the proposals.

Certain members of the EIOPA Board do not consider that the review of the RTS is appropriate before the full review of the PRIIPs Regulation itself. In addition, some members of the EIOPA Board consider that the UCITS Regulation should be amended so that UCITS do not need to provide a UCITS Key Investor Information Document to retail investors. The PRIIPs Regulation temporarily exempts UCITS from the requirement to provide a KID, which expires on December 31, 2021. This latter point is agreed as a policy matter between the boards of EIOPA, the EBA and ESMA and an appropriate recommendation is included in the draft final report attached to the ESAs’ letter.

Other recommendations for changes to the PRIIPs Regulation are: (i) the inclusion of past performance information within a KID; (ii) the removal of the need to provide a KID for successive transactions for the same PRIIP, which would preserve the existing approach to UCITS regular savings plans; and (iii) allowing non-paper delivery of the KID.

Regarding amendments to the PRIIPs RTS, the ESAs’ draft final report and draft RTS include proposals to:
 

1. Introduce new methodologies to calculate appropriate performance scenarios and a revised presentation of these scenarios;
2. Revise the summary cost indicators and changes to the content and presentation of information on the costs of PRIIPs;
3. Modify the methodology to calculate transaction costs; and
4. Clarify the rules for PRIIPs offering a range of options for investment (known as MOPs), in particular to identify the product’s full cost implications.

View the ESAs’ letter and final draft report.

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