On November 11th 2015 the Joint Committee of the European Supervisory Authorities (“ESAs”), consisting of the European Banking Authority (“EBA”), the European Insurance and Occupational Pensions Authority (“EIOPA”) and the European Securities and Markets Authority (“ESMA”), published its Joint Consultation Paper on Key Information Documents (“KIDs”) for Packaged Retail and Insurance-based Investment Products (“PRIIPs”) (the “Consultation Paper”).
"The purpose of this Consultation Paper is to collect stakeholder views on the Regulatory Technical Standards (“RTS”) on the presentation and content of the KID in accordance with Regulation (EU) No 1286/2014 (the “PRIIPS Regulation”)."
The draft RTS contained in the Consultation Paper refer to three articles of the PRIIPS Regulation: (i) the presentation and content of the KID, including the methodologies underpinning the presentation of risks, rewards and costs, under article 8(5); (ii) the requirements for the revision and republication of KIDs, under article 10(2); and (iii) the requirement for the KID to be provided in a timely fashion to retail investors, under article 13(5).
Regarding the presentation of the KID, the draft RTS include four annexes which contain a mandatory template for the KID and proposed methodologies underpinning the presentation of risks, rewards and costs.
A summary risk indicator is required in the risk and reward section of the KID, as a guide to the level of risk of the product. A methodology is also included for the assignment of each PRIIP to one of the seven classes contained in the summary risk indicator and for the inclusion of narrative explanations, and for certain PRIIPs, additional warnings. Further, the draft RTS include requirements and formats on the presentation of performance scenarios and costs.
For products offering multiple investment options (“MOP”) that cannot be presented in a single stand-alone KID two options will be possible: (i) produce separate KIDs for each option containing information about the PRIIP in general and about the option in particular; and (ii) produce a generic PRIIP and then in a separate document(s) produce the specific information about the options.
According to the draft RTS, the KID shall be reviewed and revised and re-published as necessary at least on a yearly basis and ad hoc revisions shall be conducted when necessary. The draft RTS provide that retail investors shall receive the KID in good time. The timing of the delivery of the KID may vary depending on the needs of retail investors and the PRIIP in question but it should be sufficiently early for the retail investor to read and consider it before being bound.
Once implemented, the KID aims to ensure that retail investors receive sufficiently clear and understandable information, in order to be able to compare PRIIPs across the EU and make better informed investment decisions.
The ESAs have also held a public hearing on KID for PRIIPs in Frankfurt on December 9th 2015 in support of the Consultation Paper. The closing date set in the Consultation Paper for stakeholder input is January 29th 2016.
The RTS and accompanying impact assessment will be submitted for endorsement by the European Commission by March 2016. The ESAs shall also publish their final feedback on the Consultation Paper at this time.
By January 1st 2017, PRIIPs manufacturers must prepare and publish KIDs for each PRIIP they manufacture and from that date, the entities selling or advising on PRIIPs (banks, insurance or securities firms) must provide KIDs to retail investors.