The more is published about them, the less clear the outlook becomes for PRIIPs and UCITS

Having flagged it up in its written statement in June, HM Treasury published a short update at the end of July on what it plans to do with the PRIIPs Regulation in the UK after the end of the transition period.

The document flags three changes it intends to make to the onshored Regulation:

1. An amendment enabling the FCA to clarify the scope of the PRIIPs Regulation through their rules.

This allows the FCA to clarify whether some types of corporate bond are in scope.

2. An amendment to replace ‘performance scenario’ with ‘appropriate information on performance’ in the PRIIPs Regulation

Because of the procyclicality of the performance scenarios, the FCA will be able to determine more appropriate calculation and presentation of performance.

3. An amendment enabling HM Treasury to further extend the exemption currently in place for Undertakings for the Collective Investment in Transferable Securities (UCITS) funds

Because the “government currently considers that the existing rules for UCITS disclosure are satisfactory”, an extension of the UCITS exemption of up to five years is proposed to allow a full review of fund disclosure requirements.

At the same time, the European financial consumer lobby group Better Finance issued a statement calling for a review of the overarching Level 1 PRIIPs Regulation before tinkering with the level 2 Regulatory Technical Standards (RTS), the addition of past performance to a KID and for the UCITS exemption to be extended further while all of this is sorted out.

Although both publications call for the same things, neither HM Treasury nor a consumer lobby group has any power over EU regulators or legislators.

Don’t forget that July also saw the publication – but not the submission to the European Commission, because the regulators couldn’t all agree – of an updated set of RTS, in which the regulators also called for the addition of past performance in time for the inclusion of UCITS funds.  But their solution, in the absence of changes to the Level 1 Regulation, is to put past performance on a separate document and refer to that in the KID.

We now have some unusual situations, with MEPs vowing to keep past performance off PRIIPs KIDs, even though a consumer group strongly supports the change; a set of revised RTS designed to reduce the procyclicality of future performance scenarios that can’t be submitted to the Commission for endorsement; and an exemption for UCITS funds that almost certainly won’t expire at the end of next year as planned, in the UK at least.

With no sign of any accord, what chance is there of a review of the Level 1 PRIIPs Regulation to revise the whole concept of the KID on the back of over two years’ experience in the real world?