What the latest PRIIPs FAQs mean for you: Key takeaways & how we’re responding

On 5 May 2025, the European Securities and Markets Authority (ESMA) published updated FAQs on the PRIIPs Delegated Regulation. These clarifications cover several critical areas, including market risk assessment methodology, performance scenario calculations, and cost disclosures.

This article outlines the most relevant updates for PRIIPs manufacturers and how FE fundinfo’s platform continues to align with these requirements. With robust daily monitoring logic and flexible implementation parameters already in place, FE fundinfo remains fully compliant with ESMA’s expectations and ready to support clients through any further regulatory change.

1. Market risk assessment: How and when MRM class changes

What ESMA clarified

ESMA reaffirmed that a PRIIP’s Market Risk Measure (MRM) class should only be updated if the new class has appeared as the majority of daily reference points over the previous four months. This approach introduces a smoothing effect intended to reduce unnecessary volatility in Key Information Document (KID) updates. However, the general requirement to review the KID at least once every 12 months still applies. Even if a recent review was completed, a further update must be made if a change in the Summary Risk Indicator (SRI) is detected during ongoing monitoring.

What this means in practice:

• MRM class changes should not be made based on short-term movements.
• Annual reviews do not exempt firms from issuing earlier updates if the SRI changes mid-cycle.
• Risk disclosures must remain fair, clear, and not misleading throughout the life of the product.

FE fundinfo’s implementation:

• MRM values are calculated and monitored daily, and the four-month majority rule is automatically applied.
• Clients are notified in real time when an MRM change meets the regulatory trigger for a new KID.
• Override functionality is built in for cases where clients believe the calculated SRI does not reflect the true risk.
• Changes in investment strategy and policy are tracked through dedicated logic and proxy data handling.

2. Stress volatility for category 3 PRIIPs: Percentile use in calculations

What ESMA clarified

The updated FAQ confirms that the methodology for calculating stress volatility in Category 3 PRIIPs must include point 18(d) of Annex IV. This point specifies the use of the 99th percentile for a one-year holding period and the 95th percentile for other durations. While earlier references focused on points 18(a)–(c), ESMA clarified that the full methodology requires inclusion of all four points.

What this means in practice:

• Calculations for Category 3 PRIIPs must reflect both the 99th and 95th percentile thresholds.
• Stressed volatility must be inferred consistently with these updated expectations.
• Any system not using point 18(d) would require correction.

FE fundinfo’s implementation:

• We provide  PRIIPs Category 3 calculations.
• While we do not apply these calculations directly, we advise clients to validate that their third-party providers incorporate the full percentile logic as clarified by ESMA.

3. Intermediate periods: Sub-interval selection for performance scenarios

What ESMA clarified

ESMA clarified that when calculating unfavourable, moderate, and favourable performance scenarios for intermediate periods—such as one year or half of the recommended holding period (RHP)—the actual duration of the intermediate period should define the sub-intervals used. This applies to both fixed and decreasing sub-intervals outlined in Annex IV.

What this means in practice:

• Intermediate performance periods must use time-accurate sub-intervals for scenario modelling.
• Decreasing sub-intervals are applicable for unfavourable outcomes only and for periods exceeding one year and lower than RHP or half RHP.
• All relevant points in Annex IV must be reflected in calculation engines to ensure accuracy.

FE fundinfo’s implementation:

• Our system uses intermediate durations to define sub-intervals across all RHPs.
• Decreasing sub-interval logic is applied correctly in unfavourable scenarios, where applicable.
• These methodologies are in line with both regulatory definitions and investor disclosure best practices.

4. Stress scenario table: Interpretation of the '1 year' holding period

What ESMA clarified

ESMA clarified that the '1 year' label in the stress volatility table under Annex IV refers to all PRIIPs with a RHP of one year or less. This distinction is important for correctly applying the table’s volatility values across different RHPs.

What this means in practice:

• Products with an RHP of exactly or under one year should apply the same stress scenario parameters.
• Systems must not assume different volatility logic for products slightly under one year.
• Clear logic must be in place to differentiate between ≤1 year and >1 year cases.

FE fundinfo’s implementation:

• Our logic accounts for RHPs at or below one year, though none are currently present in our system.
• The correct stress scenario values are applied automatically based on the product’s defined RHP.
• Future products with short RHPs will be processed in full compliance with this clarification.

5. Entry costs and the €10,000 investment amount

What ESMA clarified

According to ESMA, entry costs must be included in the €10,000 investment amount specified in Annex VI. This means they should be deducted upfront in both monetary and percentage-based cost projections. The intention is to reflect the actual capital available for investment after all entry charges are applied.

What this means in practice:

• Entry costs reduce the initial investment base used in cost and return calculations.
• Systems must deduct these costs before calculating any return projections.
• Both formats—monetary and percentage—must reflect the reduced investment.

FE fundinfo’s implementation:

• Entry costs are automatically deducted before projections are run, ensuring the €10,000 is treated as a gross amount.
• All output figures reflect net invested capital, delivering transparency to investors.
• Our platform handles this logic consistently across all PRIIPs.

Final thoughts

The May 2025 ESMA updates provide welcome clarity on the application of the PRIIPs Delegated Regulation. They reinforce the need for ongoing monitoring, methodological precision, and the ability to respond quickly to classification or calculation changes.

With robust daily monitoring, flexible risk override capabilities, and a regulatory framework designed for adaptability, our system ensures that client disclosures remain accurate, timely, and fully compliant. FE fundinfo is well-positioned to meet current ESMA expectations and to support any future regulatory developments with confidence.

If you'd like assistance with reviewing your current KIDs or adapting to these updates, we’re here to help.

Contact us