European Supervisory Authorities and European Commission Disagree on Retail Fund Investor Disclosures
10/01/2018The Joint Committee of the European Supervisory Authorities (i.e., the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority) has published a letter it has sent to the European Commission, in response to a request from the European Commission on August 10, 2018 for the ESAs to develop guidance on facilitating the production and distribution of information on investment funds.
The Regulation on Packaged Retail and Insurance Based Investment Products (PRIIPs) has, since January 1, 2018, required a pre-contractual Key Information Document (known as the PRIIPs KID) to be provided to retail investors in good time before they are bound by any contract or offer relating to that PRIIP. Although UCITS (Undertakings for Collective Investment in Transferable Securities) meet the definition of a PRIIP, the UCITS Directive already contains requirements for a Key Investor Information Document (known as the UCITS KIID), which provides retail investors with information similar to the content of the PRIIPs KID. Transitional provisions in the PRIIPs Regulation allow manufacturers and persons advising on or selling units in UCITS funds to continue to provide the UCITS KIID instead of the PRIIPs KID until December 31, 2019. From January 1, 2020, the effect of the legislation is that retail investors investing in UCITS will receive both the PRIIPs KID and the UCITS KIID. The Commission must assess by December 31, 2018 whether the UCITS KIID might be replaced by or considered equivalent to the PRIIPs KID or whether the transitional provisions might be extended.
The ESAs are concerned that an approach whereby retail investors will receive what is effectively duplicate information as of January 1, 2020, is not satisfactory and risks undermining the aims of the PRIIPs Regulation. The ESAs disagree with the Commission's view in its letter of August 10, 2018 that UCITS KIID information can be effectively articulated together with the PRIIPs KID information and the ESAs' opinion is that alternative solutions should be considered, including legislative changes to avoid the outcome whereby investors are provided with duplicate information.
The ESAs plan to conduct a targeted review of the secondary legislation under the PRIIPs Regulation and as part of this process they plan to launch a public consultation in Q4 2018 to gain feedback from stakeholders. The ESAs plan to submit to the Commission proposed amendments to the secondary legislation under the PRIIPs Regulation in Q1 2019.
View the ESAs' letter to the Commission.
View the Commission letter of August 10, 2018.
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