How do the changes in the PRIIPs KID regulations affect you?

The European Commission has modified the PRIIPs KID regulations with the aim of making the information document more transparent, understandable and easy to compare for retail investors.

The Key Information Document (KID) contains the basic information of a retail investment product that must be made available to potential buyers.

The regulation seeks to unify the regulatory requirements of Packaged Retail Investment Products and Insurance-Based Investment Products (PRIIPs) with those of Undertakings for Collective Investment in Real Estate Securities (UCITS).

The new law will enter into force on January 1, 2023. Although it was initially scheduled for January 1, 2022, the backlash of the industry forced its postponement, due to operational difficulties related to the high number of KIDs to be delivered and the limited time.

Main modifications in the PRIIPs KID regulations

    • New methods to calculate profitability scenarios, in addition to an updated presentation of those scenarios, thus preventing buyers’ unrealistic expectations regarding the potential return on their investment.
    • Revised summary cost indicators, as well as changes in PRIIP cost content and presentation, to make cost structures easier to understand.
    • An updated methodology for calculating operating costs.
    • Modified rules for PRIIPs offering different investment options so that the costs involved are clearer.
    • Technical standards for information on historical profitability for certain types of UCITS, retail Alternative Investment Funds (AIF) and PRIIPs.
    • Amendments to Directive 2009/65/EC, so that investors do not receive two pre-contractual information documents, the KID of the PRIIPs and the KIID required by the UCITS regulations. The PRIIPs KID will suffice from July 1, 2022 on.

For more information you can access the new complete Delegated Regulation here.

What do the European Supervisory Authorities have to say about the new regulations?

On July 27, 2021, the European Commission sent the European Supervisory Authorities (ESAs) a request to review the new regulation. The ESAs, which comprise the EBA (European Banking Authority), the EIOPA (European Insurance and Occupational Pensions Authority) and the ESMA (European Securities and Markets Authority), replied on May 9 with the following proposals:

    • Using the European Single Access Point (ESAP), which provides access to public information on EU companies and investment products.
    • Performing tests with consumers to check if the content of the KIDs is clear and understandable enough.
    • Facilitating access to the KID on the web and adapting it to digital media to turn the KID into an interactive tool.
    • Recommendations on implementation: keeping the exemptions described in article 2, creating a longer and clearer list of products that fall within the scope of the regulation…
    • Including past PRIIP performance and sustainability information.
    • Facilitating the comparison of products so that different approaches can be chosen for different product types when necessary.
    • Recommendations on Multi-Optional Products (MOP): presenting the investment options in separate documents, preparing KIDs with a maximum of three pages and providing the investor with a representative document of the combination of their investment options. MOPs are Undertakings for Collective Investment in Securities (UCITS) and certain funds offered as investment options underlying a PRIIP.
    • Adjusting the costs information required by the regulation to the information requested by MiFID and IDD (Insurance Distribution Directive).

This is a small summary of the proposals of the European Supervisory Authorities. For more details, you can access the full document here.

How can Qbitia help you?

Regulatory updates usually present a series of challenges. In this case, due to the high number of KIDs, the short implementation period and the amount of data required, the new regulation entails an operational challenge for the industry.

In order to make this process easier, Obitia offers QKID, a specialized service for the management of the PRIIP KIDs. QKID provides a module for the calculation of all the risk and return ratios, as well as the details of the costs that must be included in the document to comply with transparency requirements.