Regulation on the Key Information Document for packaged retail and insurance-based investment products (PRIIPs)

On 1 January 2018, the PRIIPs Regulation became applicable. It introduces the requirement for product manufacturers - before making a packaged retail and insurance-based investment product (PRIIPs) available to retail investors - to draw up a standardised Key Information Document (KID) and publish it on their website. Distributors (persons selling or advising) of PRIIPs have to hand over this KID to retail investors. The KID is intended to provide precontractual information on the nature, risks, costs, potential gains and losses of the product; it should facilitate comparison between different products and can be a maximum of 3 pages.

Over the past years, various issues with the current KID have been raised by stakeholders (both by industry - including BIPAR - and consumer representatives).

Review of PRIIPs and KID

The review of PRIIPs is happening in different phases:

  • Level 2 targeted amendments were adopted at the end of 2021 and had to be implemented on 1 January 2023. The amendments to the level 2 Regulatory technical standards focus on:
    • the underpinning methodology and presentation of performance scenarios,
    • the presentation of costs and the methodology for the calculation of summary cost indicators,
    • the presentation and content of information on past performance (disclosure in the “other relevant information” section of the KID),
    • the presentation of costs by PRIIPs offering a range of options for investment (“MOPs”),
    • avoiding a duplication of the PRIIPs KID and the UCITS (Undertaking for Collective Investments in Transferable Securities) KIID.
  • Also at the end of 2021 a new deadline was published for UCITS fund providers to switch from the UCITS Key Investor Information Document (KIID) to the PRIIPs KID (1 January 2023). In this text the Commission is also urged to submit as a matter of urgency a report, accompanied, where appropriate, by a proposal to address the existing limitations of the PRIIPs Regulation (for example, a need for a clearer definition of retail investors, the product scope of the PRIIPs Regulation and the elimination of paper by default).
  • The Level 1, broader review of the PRIIPs Regulation will be included in the Commission’s upcoming Retail Investment Strategy (RIS). For the RIS, the following aspects will be looked at in detail:
    • the use of the PRIIPs KID (for which products do distributors / financial advisors use KIDs to choose products they offer clients, …),
    • the use of comprehension alerts for complex products,
    • the practical application of PRIIPs rules (for example, the number of relevant misselling events before/after introduction of PRIIPs KID),
    • the question as to whether the KID is adapted to digital media,
    • the question of whether pension products should use a KID in future.

As mentioned above, the ESAs have provided technical advice to the Commission on these aspects early May (after consultation). In their advice, the ESAs state there is need for further changes to the Level 1 Regulation (beyond the Commission mandate for the Retail Investment Strategy advice on PRIIPs). The ESAs, amongst others, call for inclusion of past performance in the KID and on information on environmental and social objectives targeted by the product to be included in the KID.
The ESAs also open the way for a “dashboard” containing the essential information at the top of KIDs; they call for uniformity of the rules on the provision of the KID in PRIIPs / IDD / MiFID II. They also call for manufacturers to be able to provide a more personalized / tailored KID. For multi option products, they propose that persons selling or advising shall provide the investor either with KIDs for the investment options the investor is considering or a KID that reflects the combination of investment options that the investor is considering.

The RIS is expected in April 2023.

ESAs supervisory statement

On 9 May 2022, the three ESAs also issued a joint supervisory statement regarding the “What is this product?” section of the KID. They had identified a range of poor practices in how PRIIP manufacturers describe products under this section, mostly related to a general lack of clarity in the text, making it difficult for retail investors to understand the key features of products. The statement provides an overview of the issues and sets out the authorities’ expectations in each area to ensure that information is presented to retail investors in an adequate, clear and accessible manner.