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The ESAS Final Recommendations on changes to the KID for PRIIPS

Background

  • Published on the 8th February following earlier consultation, the European Supervisory Authorities issued their final recommendations on changes to the Key Investor Document, KID for Packaged Retail and Insurance based Investment Products PRIIPs.

Impact

  • Having taken into account the feedback received and considering in particular the implications of a possible decision by the European Co-legislators to defer the application of the KID by certain types of investment funds beyond 2020, the ESAs decided the following:
  • To not propose targeted amendments at this stage
  • To initiate a more comprehensive revision of the PRIIPs Delegated Regulation to be undertaken in the course of 2019, including to launch a consultation on the draft Regulatory Technical Standards
  • Furthermore, the ESAS issued a Supervisory Statement  regarding the performance scenarios to promote consistent approaches and improve the protection of retail investors prior to the conclusion of the review.
  • The ESAS consider that there is a risk that retail investors are provided with inappropriate expectations about the possible returns they may receive. Therefore, the ESAS recommend PRIIP manufacturers to include a warning in the KID to ensure that retail investors are fully aware of the limitations of the figures provided in the performance scenarios.
  • The Supervisory Statement is issued under Article 29(2) of the ESAs’ Regulations as a convergence tool to promote common supervisory approaches and practices.
  • The PRIIPs Regulation (No 1286/2014) defines the main rules and principles for KIDs. It is supplemented by a Delegated Regulation (2017/653) specifying the presentation and contents of the KID, which is based on Regulatory Technical Standards that the ESAs were mandated to develop.
  • Performance scenarios are included in the Section of the KID titled ‘What are the risks and what could I get in return?’ They indicate how the investment could perform under various different scenarios.

Timeline

  • Further Regulatory Technical Standards to follow in the course of 2019.