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 and 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).

State of play

On 1 January 2023, some new PRIIPs rules started applying:

• The PRIIPs “quick-fix Regulation” - amending the PRIIPs Regulation to include an extension till 1 January 2023 for UCITs to start using the KID instead of the KIID (Key Investor Information Document) and quick-fix Directive, amending the UCITs Directive to state that the KID should be considered as satisfying the requirements applicable to UCITS key investor information (the texts also pointed out the various limitations of the PRIIPs Regulation).
• PRIIPs Level 2 amendments - targeted amendments regarding the cost presentation, performance scenarios, past performance and rules for multi option products.

 

The broader level 1 review of PRIIPs is included in the Commission’s Retail Investment Strategy (RIS). For the RIS, the following aspects were intended to 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 the 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.

 

This follows technical advice of the 3 ESAs to the Commission in May 2022 (after consultation and BIPAR responses to these consultations). In their advice, the ESAs state there is need for further changes to the Level 1 Regulation (beyond the Commission’s mandate for the Retail Investment Strategy advice on PRIIPs).

The Commission’s proposal “as regards the modernisation of the key information document” in the framework of the RIS was published on 24 May 2023, in parallel with the Omnibus RIS Directive. The Commission states that the measures included in the RIS are consistent with the targeted changes to PRIIPs KIDs.

 

The Commission explains that the proposal mainly aims to:

• adapt disclosures to the digital environment and to the evolving needs of retail investors, and to
• provide further clarity on the scope of PRIIPs with regard to corporate bonds with make-whole clauses and immediate annuities. Indeed, retail products providing immediate annuities without a redemption phase and certain types of corporate bonds with make-whole clauses are now explicitly out of scope of PRIIPs (no KID needed).

 

The proposal introduces furthermore amongst others:

• a definition of electronic format and a stronger preference for the electronic format (also specification of the conditions for the use of layering and personalisation of the KID);
• amended rules for presenting costs of multi-option products;
• a new section in the KID “Product at a glance” to summarise and highlight the information on an investment product type, its costs and the level of risk, recommended holding period and presence of insurance benefit.
• removal of the comprehension alert for complex products as it was not deemed effective;
• a new section in the KID on sustainability to provide investors with a harmonised set of information on the sustainability profile of relevant investment products, building on existing product disclosures;
• a new statement that the KID shall remain accessible on the website of the person advising or selling the PRIIPs.

BIPAR’s position/key messages

BIPAR has, from the outset, agreed that for all products which include an investment risk, specific, proportional and relevant pre-contractual information should be available. However, it pointed out from the start how extremely ambitious and difficult it is to achieve a level playing field and relevant, real comparability between all products within the scope of PRIIPs, adding that there was a risk that harmonisation could result in misinformation of the retail investor. BIPAR, for instance, pointed out that IBIPs could be perceived as less interesting/more expensive at the moment compared to “pure investment products”.

Next steps

The proposals for review of the PRIIPs Regulation as part of the RIS will now follow the regular legislative process and BIPAR will provide its comments to the co-legislators in this respect.

In the Parliament, the ECON committee is in charge of the PRIIPs file. The lead rapporteur is French Liberal (Renew) MEP Stéphanie Yon-Courtin. Opinion committees are the Internal Market and Consumer Protection (IMCO) and the Civil Liberties, Justice and Home Affairs (LIBE) committees (the ENVI committee was appointed too but decided already not to give an opinion).