The European Supervisory Authorities (ESAs) have informed the European Commission of the outcome of the review conducted by the ESAs of the key information document (KID) for packaged retail and insurance-based investment products (PRIIPs). This follows the ESAs' consultation paper published on 16 October 2019 on draft regulatory technical standards (RTS) to amend the technical rules on the presentation, content, review and revision of the KID.
The ESAs issued a draft (unapproved) report with draft RTS which was adopted at the EBA and ESMA Boards but not the EIOPA board. EIOPA board members who did not support the RTS argued that a partial revision of the PRIIPs Delegated Regulation is not appropriate at this stage, ahead of a comprehensive review of the PRIIPs Regulation. The European Parliament and the Council will be given the opportunity to object to the RTS.
The draft amending RTS includes proposals in the following main areas:
- New methodologies to calculate appropriate performance scenarios and a revised presentation of these scenarios, with a view to ensuring that retail investors are not given inappropriate expectations about the possible returns they may receive.
- Revisions to the summary cost indicators and changes to the content and presentation of information on the costs of PRIIPs, to allow retail investors to better understand the different types of cost structures, as well as to better facilitate the use of this information by persons selling or advising on PRIIPs.
- Modifications to the methodology to calculate transaction costs to address practical challenges that have arisen when applying the existing rules, and address issues regarding the application to certain types of underlying investments.
- Refinements to the rules for PRIIPs offering a range of options for investment (MOPs) reflecting experience of challenges regarding the clarity and usefulness of the information, in particular to identify the product's full cost implications.
- The incorporation of existing provisions applying to investment funds into the PRIIPs framework, given the expiry of the exemption in Article 32 of the PRIIPs Regulation on 31 December 2021.
- The requirement for certain types of investment funds and insurance-based investment products to publish information on the past performance of the product and refer to this within the KID so that the availability of this information is known, and the information is published in a standardised and comparable format.
The report also contains recommendations for targeted amendments to the PRIIPs Regulation.
- The ESAs would prefer to include past performance information within the main contents of the KID on the basis that it is key information to inform retail investors about the risk-reward profile of certain types of PRIIPs. A targeted amendment to the PRIIPs Regulation would be needed.
- To avoid the co-existence of the PRIIPs KID and the UCITS Key Investor Information Document (KIID); this would involve an amendment to the UCITS Directive so that UCITS managers no longer have to provide a UCITS KIID to retail investors.
- A change to the PRIIPs Regulation, which addresses successive transactions for the same PRIIP given significant practical challenges to apply the existing approach to UCITS regular savings plans
- A suggestion that the co-legislators consider a minor change to facilitate the non-paper delivery of the KID.
