On June 23rd 2015 the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority (the “ESAs”) published a technical discussion paper on risk, performance scenarios and cost disclosures for Key Information Documents (“KIDs”) for packaged retail and insurance-based investment products (“PRIIPs”) (the “Technical Discussion Paper”). The ESAs are looking for feedback from all concerned stakeholders by August 17th 2015 in order to allow them to draft the relevant Regulatory Technical Standards (“RTS”) in relation to Article 8 of Regulation 1286/2014 of November 26th 2014 on the KID for PRIIPs (the “PRIIPs Regulation”).
As a reminder, the PRIIPS Regulation sets out uniform rules on the form and information of the KID in order to enable retail investors to understand and compare the key features and risks of the PRIIP.
The Technical Discussion Paper seeks to obtain feedback on the possible methodologies to determine and display risks, performance and costs in the KID. The Technical Discussion Paper is divided between risk and reward (which incorporates performance scenarios) and costs. A number of different methodological options are identified for each element of disclosure.
Three risks are considered for the risk indicator: market, credit and liquidity risk. Multiple approaches have been assessed and the paper presents the four approaches that are considered viable.
Four approaches are also highlighted for performance scenarios from letting the manufacturer of a PRIIP decide which scenarios to present in the KID to prescribing exactly what scenarios should be included.
The cost section starts by identifying the different types of costs of the different types of PRIIPs. This is largely based on the UCITS example but includes different types of costs that were excluded from the “ongoing charges figure” of UCITS. The section on costs also aims to assess the different possible ways of aggregating these different types of costs.
The next steps will be to issue a final Consultation Paper setting out the draft RTS in the autumn of 2015.
A separate Consultation Paper will also be published for the draft Regulatory Technical Standards for Articles 10 and 13 of the PRIIPs Regulation which relate to the review and revision of the KID and the provision of the KID to retail investors, respectively.
The draft RTS on Article 8 are expected to be finalised and submitted to the European Commission by March 31st 2016, as set out in the PRIIPs Regulation.
On April 3rd 2014, the European Council published a final compromise on the proposed regulation on key information documents (KID) for packaged retail investment and insurance based investment products (PRIIPs).
On April 15th 2014, the European Parliament (EP) in plenary session voted to adopt the final compromise.
It is expected that the Council will endorse the EP’s position so that the regulation will apply two years after the date of its entry into force (i.e. in mid-2016).