Tuesday January 3 2017

News Source: Fund Regulation

Focus: PRIIPS KID

Type: General

Country: European Union




The draft Regulatory Technical Standards (RTS) on key information documents (KIDs) for packaged retail and insurance-based investment products (PRIIPs) under the PRIIPs Regulation (1286/2014) were rejected by the European Parliament on 14th September 2016. The European Supervisory Authorities (ESAs) were informed by the European Commission of its intention to amend the draft RTS on 10th November 2016. The ESAs comprise the European Insurance and Occupational Pensions Authority (EIOPA), the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA).

The ESAs discussed the amendments to the draft RTS received from the European Commission and presented an Opinion to the three Boards of Supervisors covering all of the areas addressed by the Commission’s letter and the amendments in the RTS. The Opinion was adopted at the EBA and ESMA Boards on the basis of qualified majority voting. However, it did not receive the support of a qualified majority of the EIOPA Board as there were differing views expressed in particular concerning the treatment of multi-option products, the criteria to determine whether a comprehension alert should be included in a KID, and the provisions in the RTS on the credit risk mitigation factors for insurers. As a result, the three ESAs are not in a position to provide an agreed opinion on the amended draft RTS.

Despite this lack of agreement, there was a general consensus during the discussions within the ESAs’ Boards that the amendments to the performance scenarios proposed by the Commission raised comprehension issues and may be misleading. The main concerns raised on this were:

  • the credibility of the ‘moderate’ scenario if it is either zero or, once costs are considered, indicates an expectation of losses over the whole recommended holding period.
  • If the Commission wishes to amend the RTS along the lines it has proposed, one option the ESAs considered was the use of the mean of the distribution of risk free returns, adjusted for dividend yields
  • given the review of the PRIIPs Regulation due by 31 December 2018, it was considered important for alternative approaches to be investigated as part of that review process.

Click on the above link to view the ESAs response.