PRIIPS

European Commission Guidelines on Application of PRIIPS Regulation

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On July 4, 2017, the European Commission adopted a communication containing guidelines on the application of the Regulation on key information documents (“KIDs“) for packaged retail and insurance-based products (“PRIIPS“) (Regulation 1286/2014) (PRIIPS Regulation).

The PRIIPS Regulation lays down rules on the content and format of the KID to be drawn up by PRIIP manufacturers and on the provision of the KID to retail investors and those selling or advising on the products. By smoothing out potential interpretative divergences throughout the EU, the guidelines hope to help providers and distributors of investment products, funds and investment insurance policies design their KIDS. Along with several others, the guidelines address the following issues:

  1. products covered by the PRIIPS Regulation;
  2. products made available to retail investors against no consideration;
  3. multi-option PRIIPS;
  4. insurance-based investment products with PRIIPS and non-PRIIPS as underlying investment options;
  5. territorial application;
  6. use of KIDs by UCITS;
  7. PRIIPS only sold by intermediaries;
  8. distribution of a PRIIP without a KID; and
  9. a non-PRIIP product offered alongside a PRIIP.

The communication was published in the Official Journal of the EU (OJ) on July 7, 2017, as 2017/C 218/02. Firms must comply with the Regulation from January 1, 2018.

Council of EU Postpones PRIIPS Regulation by One Year

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On December 8, 2016, the Council of the EU announced that it has adopted a Regulation postponing the application date of the Regulation on key information documents (KIDs) for packaged retail and insurance‑based investment products (“PRIIPs“). (Regulation 1286/2014) (PRIIPs Regulation).

The PRIIPs Regulation will now apply from January 1, 2018 rather than December 31, 2016.

In the Council’s press release on December 8, 2016, the Council explained that the delay will enable regulatory technical standards (RTS) to be defined, leaving enough time for the industry to adapt to the new rules.

The Council published a document (PE-CONS 51/16) setting out the text of the Regulation postponing the application of the PRIIPs Regulation.

European Parliament Announces Decision to Reject Delegated Resolution of RTS on Key Information Documents for PRIIPs

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On September 14, 2016, the European Parliament announced its decision to reject the European Commission’s proposed Delegated Regulation supplementing the Regulation on key information documents (KIDs) for packaged retail and insurance based products (PRIIPs) (Regulation 1286/2014) (PRIIPs KID Regulation). The text of the legislative resolution rejecting the proposed Delegated Regulation sets out a number of reasons why the Parliament decided to reject the Delegated Regulation, including:

  • The need for detailed guidance on the “comprehension alert” without which there is a risk of inconsistent implementation of this component in the KIDs within the single market;
  • The need for clarification surrounding the treatment of multi-option products; and
  • The risk that the rules within the Delegated Regulation are contrary to the purpose of the legislation which is to provide retail investors clear, comparable, non-misleading and understandable information on PRIIPs.

As well as calling on the Commission to submit a new delegated regulation, the European Parliament also calls on the Commission to postpone the application date of the PRIIPs KID Regulation, to ensure that the requirements in the Regulation and Delegated Regulation are implemented smoothly and avoid the application of level 1 without RTS being in force.

ECON Objects to Delegated Regulation on RTS on Key Information Documents for PRIIPs

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The European Parliament published a press release on September 1, 2016 announcing that the Economic and Monetary Affairs Committee (ECON) has voted to object to the European Commission’s proposed Delegated Regulation supplementing the Regulation on key information documents (KIDs) for packaged retail and insurance-based investment products (PRIIPs) (Regulation 1286/2014) (PRIIPs KID Regulation). This market is worth up to €10 trillion in Europe.

The proposed Delegated Regulation sets the regulatory technical standards (RTS) on the presentation, content, review and revision of the KID, together with the conditions for fulfilling the requirement to provide such documents.

ECON’s concerns include the fact that the proposed formulas in the KID for predicting investment performance contain flaws which would make performance look far better than it was likely to be. As such, this would be potentially misleading for investors.

The Commission adopted the Delegated Regulation (C(2016) 3999 final) in June 2016. The resolution will now proceed for consideration by the European Parliament in a plenary session to be held September 12-15, 2016. The PRIIPs KID Regulation is to apply from December 31, 2016. The press release does highlight that the Commission is prepared “as a second best option” to allow the PRIIPs KID Regulation to apply without the RTS in place.

European Commission Adopts Delegated Regulation on RTS on Key Information Documents for PRIIPS

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On June 30, 2016, the European Commission adopted a Delegated Regulation and related annexes supplementing the Regulation on key information documents (“KIDs”) for packaged retail and insurance-based investment products (PRIIPs) (PRIIPs KID Regulation). The delegated act introduces RTS specifying the content and underlying methodology of the KIDs that will have to be provided to retail consumers when they buy certain investment products.

The RTS specify the exact contents of the KID, which must outline the product’s aims, how risky it is, when investors can get their money back, how much it costs and its expected returns. The information must be set out in a standard way, regardless of the type of investment product.

The European Parliament and Council now have a two-month scrutiny period, which they can extend for a further month, during which to consider the Delegated Regulation. If neither of them objects, it will enter into force 20 days after its publication in the OJ and it will apply from December 31, 2016.