As part of its Retail Investment Strategy (RIS), the European Commission adopted proposals late last month for an omnibus directive to update UCITS, AIFMD, Solvency II, MiFID II and the IDD, and a regulation to “modernise” the PRIIPs KID with targeted changes, rather than a wholesale revamp.
Just when you thought things would be quiet for a while on PRIIPs!
Because the omnibus directive makes changes to five existing directives, it runs to 123 pages (plus a short annex), but all the changes are designed to improve consumer protection – protection from misleading marketing documents, protection from products that don’t deliver value for money, protection from unqualified advisers by raising professional qualifications, a drive to improve financial literacy, and a watered-down ban on payment of commission or inducements on execution-only business.
It is the 17 pages dedicated to changes to the PRIIPs KID that may well cause the most consternation.
The good news is that there is clarity that immediate annuities and certain corporate bonds are out of scope.
Changes to the content of PRIIPs KIDs
What’s being removed
Out goes the comprehension alert, as it has not only failed to warn investors about complex products, but may have discouraged them from investing in less complex products that have been caught by the alert.
Out also goes any reference to environmental or social objectives pursued by the product.
With all the acres of space saved by these, there will no doubt be plenty of room for the two new sections on the KID without worrying unduly about the three-page limit.
What’s new
In comes a dashboard (“Product at a glance”) that summarises what is found elsewhere on the KID – the type of product, the SRI, the costs, the recommended holding period and any insurance benefits.
The second new section is “How environmentally sustainable is this product?”, which will disclose the minimum proportion that qualifies as environmentally sustainable according to the EU Taxonomy if the product falls into Article 8 or 9 of the SFDR, and also the expected greenhouse gas emissions intensity of the product. So we have lost any reference to social objectives, but at least that might help save a bit of space on the KID.
Changes to delivering PRIIPs KIDs
The default option will be an electronic format, offering investors the opportunity to generate personalised information, possibly using different holding periods, and allowing for the use of layering of information, so those who want to drill down further can do so. The core KID must also be available alongside the electronic version.
When does it become law?
The devil will be in the detail, as the European regulators will have 12 months after the new regulation becomes law to deliver the Level 2 Regulatory Technical Standards (RTS), with the changes taking effect after 18 months.
The regulation and directive will only go to the Parliament and Council eight weeks after they are available in all the EU languages (so we are currently looking at some time in August), meaning the changes will not kick in until early-to-mid 2025 at the earliest. For those eight weeks, they will be open for feedback here.
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Mikkel Bates, Regulatory Manager, FE fundinfo
Further changes proposed to modernise EU PRIIPs KID
As part of its Retail Investment Strategy (RIS), the European Commission adopted proposals late last month for an omnibus directive to update UCITS, AIFMD, Solvency II, MiFID II and the IDD, and a regulation to “modernise” the PRIIPs KID with targeted changes, rather than a wholesale revamp.
