On Thursday 8 November, the three European financial supervisory authorities (ESAs) published proposed amendments to the delegated regulation on the key information document (KID) for packaged retail and insurance-based investment products (PRIIPs).
The aim is to reconcile the requirements of the 'PRIIPS' and 'UCITS' (Undertakings for the Collective Investment of Transferable Securities) regulations for harmonised investment funds.
In their document, which is submitted for consultation until 6 December, they propose several targeted changes to avoid duplicating the information obligations upon harmonised investment funds from 1 January 2020.
UCITS are exempt from the 'PRIIPS' regulation until the end of 2019. An extension of this is to be discussed in the framework of the re-examination of the regulation scheduled to take place by the end of 2018, but the European Commission notified the ESAs in July of this year that it intended to postpone this re-examination until a later date, to allow solid evidence and data to be collected.
In the absence of timely legislative amendments, therefore, by 1 January 2020, UCITSs may be required to publish two key information documents, a 'PRIIPS KID' and a 'UCITS KII'.
The ESAs have therefore taken the lead and stressed the urgent need for action. In a letter to the Commission dated 1 October 2018, they announced their intention of presenting legislative amendments, pending an overall revision of the regulation.
The most substantial modification aims to change the way the performance scenarios for PRIIPs are presented in the KID.
Some UCITS currently show information on past performances in the framework of the 'UCITS KII'. To bring the two regimes into line with each other whilst taking on board criticism from market players that the performance scenarios set out in the 'PRIIPS KID' tend to provide an overly positive overview of potential yield, the ESAs propose to include information on past performance, where available.
The ESAs are also considering other legislative changes stemming from the end of the exemption for UCITs and on calculating the market risk measurement.
These amendments will take the form of regulatory technical standards (RTS), which the ESAs will submit to the Commission for approval in January 2019, so that they can apply from 1 January 2020, as long as there is no objection from the co-legislators. (Original version in French by Marion Fontana)