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

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


The PRIIPs EU Regulation introduces a standardised, easy to understand, precontractual “Key Information Document (KID)” for PRIIPs, which should facilitate comparison between different products. The Regulation has applied since January 2018, is binding in its entirety and directly applicable in all Member States.

The Commission was initially expected to review the Regulation by end 2018. The review is ongoing.

Subject matter and scope

The Regulation applies to packaged retail and insurance-based investment products, which are, broadly speaking, products where the amount repayable, or the maturity or surrender value, is subject to fluctuations. It does not apply to non-life insurance or to life insurance contracts where the benefits under the contract are payable only on death or incapacity due to injury, sickness or infirmity. It does not apply to “simple” deposits, certain securities and pensions (for pensions, the Commission should assess the situation in its review).

The Regulation only aims at the protection of retail investors (i.e. “client” as defined in MiFID II or “customer” as defined in IMD I where that customer would not qualify as a professional client as defined in MiFID II).

Key issues for intermediaries/financial advisers

BIPAR agreed, from the outset, that for all products which include an investment risk, specific, proportional and relevant pre-contractual information should be available. BIPAR requested clear confirmation about who is responsible for the KID. Throughout the legislative process BIPAR opposed any additions to the KID regarding information on the person selling the product, which is already adequately addressed in specific instruments, such as MiFID and IDD.Since the application, BIPAR discussed with its members the availability and use of KIDs in practice, for example, on risk rating and the risk scales used, on the costs/pricing scenario for the basis of the KID, on performance scenarios and on the specific case of UCITs (Undertakings for the Collective Investment in Transferable Securities - see below).

Responsibilities of the manufacturer/person selling

The manufacturer is defined as "any entity that manufactures PRIIPs and any entity that makes changes to an existing PRIIP, including, but not limited to, altering its risk and reward profile or the costs associated with an investment in a PRIIP".

The person selling a PRIIP is defined as "a person offering or concluding a PRIIP contract with a retail investor".

The product manufacturer - before making a PRIIP available to retail investors - draws up the KID and publishes it on his website. The person advising or selling must provide the KID to the investor for free and in good time before the latter is bound by any contract or offer.

The Regulation also contains a reference to persons advising or selling PRIIPs with regard to complaints-handling. Indeed they also (together with manufacturers) have to establish appropriate procedures and arrangements that ensure that retail investors have an effective way of submitting a complaint against the manufacturer, that they receive a substantive reply in a timely and proper manner, and that procedures are also available in case of cross-border disputes.

Form and content of the Key Information Document

The KID is a maximum of 3 pages, is clear and understandable/readable and is intended to provide information on the nature, risks, costs, potential gains and losses of the product and help comparison with other products.It contains information on:

  • the manufacturer and supervisor,
  • the date,
  • if needed, a comprehension alert warning to the investor that the product is not simple,
  • the nature and main features of the product (type; objectives and means for achieving them; description of the type of retail investor to whom the PRIIP is intended to be marketed; details of insurance benefits- if any; terms of the PRIIP),
  • the risk-reward profile,
  • the consequences of default of the manufacturer,
  • the costs (summary indicators and total aggregate costs) - reference is made to distribution costs to be provided by the advisors, distributors or any other person advising on or selling the PRIIP.

Level 2 measures

  • A delegated Regulation on the content and presentation of the KID, including the calculation of costs; the review/revision of the KID; and the provision of the KID.
  • A delegated Regulation on product intervention
  • There was an empowerment for a Delegated Act on the details of procedures to establish if a PRIIP targets specific environmental or social objectives (“EOS PRIIPs”) but the Commission did not publish a Delegated Act (the ESAs did publish their technical advice to the Commission in July 2017 for which BIPAR provided input.For more detail see last year’s Annual Report). At the end of 2018, the Commission did start working however on the development of an “EU Ecolabel for Financial Products” (see article on sustainable finance for more information).

Level 3 measures

  • Interpretative Guidelines on the KID by the Commission (July 2017), covering issues such as application of PRIIPs rules by Multi-Option Products’ (MOPs) manufacturers, KIDs for IBIPs, PRIIPs only sold by intermediaries; etc. Guidelines are not legally binding and are based on stakeholder feedback received, amongst others from BIPAR.
  • Questions and Answers” on the KID by the ESAs (latest sets published in July 2018 and April 2019). Q&As are also not legally binding, nor are they subject to a "comply or explain" procedure. They aim at “promoting common supervisory approaches and practices in the implementation of the KID”. They cover issues such as costs added by brokers, the meaning of biometric risk premium/insurance premium, the role of advisers and intermediaries in case of Multi-Option Products (MOPs), etc.

Review of PRIIPs / Next steps

The Commission was due to review the PRIIPs Regulation by 31 December 2018, including specific surveys such as the inclusion in the scope of pensions or a market survey on national online fund calculators. The Commission, however, did not meet this deadline.

At the end of 2018, the three European Supervisory Authorities consulted on targeted amendments to the Delegated Regulation covering the rules for the KID for PRIIPs.BIPAR responded to the consultation:

  • calling for a thorough review of the KID for PRIIPs,
  • stressing that it does not support investors receiving both the UCITs KIID and the PRIIPs KID and that in the meantime, it is better to keep the current system i.e. an exemption for UCITs so that UCITS management companies can continue providing a KIID instead of a KID.
  • supporting the inclusion of past performance in the KID’s performance scenarios.

In February 2019, the ESAs published their final recommendations. They decided not to propose targeted amendments to PRIIPs at that time, but to initiate a more comprehensive revision of the level 2 PRIIPs Delegated Regulation in 2019, amongst others, on performance and cost disclosure. In a public hearing on PRIIPs, the ESAs explained that their work will focus on level 2, but if they find that level 1 changes are needed, they would recommend such changes too. They added that some further differentiation for certain PRIIPs may be needed and that they will also do consumer testing regarding the existing KID and possible alternatives. Alongside the recommendations, the ESAs also published a supervisory statement recommending PRIIP manufacturers to include a warning in the KID, so retail investors are aware of the limitations of the current performance scenarios.

In parallel, the European legislators agreed to extend the deadline for the review of the PRIIPs Regulation until 31 December 2019 and to extend the exemption for UCITs so they can continue providing a KIID instead of a KID until end 2021.

In October 2019, the ESAs launched a new consultation setting out proposed amendments to the PRIIPs Delegated Regulation on the KID. The review is to address the main regulatory issues identified by stakeholders and supervisors since the implementation of the KID and to make specific changes to allow the rules to be applied to UCITs.

The consultation paper proposed changes relating to the following topic areas:

  • Illustrations of what the retail investor might receive in return from their investment (performance scenarios: future performance scenarios, the inclusion of past performance, …);
  • Information on what the costs of the investment are;
  • Specific issues for different types of investment funds (in particular the case of UCITs and relevant non-UCIT funds);
  • Specific issues for PRIIPs offering a range of options for investment (so-called "Multi-Option Products" or “MOPs”).

BIPAR responded to the consultation, stating that the legislators and supervisors should take the time to carry out a proper review of the elements which have shown to be incorrect.In the meantime, the KIDs (or elements of the KIDs) that are considered to be misleading should be removed by the supervisory authorities.The sector needs regulatory stability. Frequent changes or “clarifications” to legal texts do not help creating trust and confidence by consumers and are very costly to the entire economy.

As part of the review, the European Commission, in cooperation with the ESAs, also undertook a consumer testing exercise to assess the effectiveness / retail investors’ preferred option regarding performance scenarios and past performance information within the PRIIPs KID. The results were published on 27 February 2020.

Next steps

The ESAs intended to conclude their review around the end of the first quarter of 2020 and submit their final proposals to the European Commission shortly afterwards. This has not yet been done.

The European Commission’s wider review of the PRIIPs Regulation (level 1) will also look at the interaction with other recent new information requirements such as in IDD and MiFID II, how they work together and if the interplay can be improved.

The Commission is expected to soon launch a study to bring all of this together.

- Published in June 2020 -

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