PRIIPs: ESAs´ proposals improve information for investors
- BVI calls for extension of fund exemption
- PRIIPs and UCITS KIDs cannot coexist
The German Investment Funds Association BVI welcomes the proposals of the European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) to improve the regulatory technical standards for key information documents (KIDs) for packaged retail and insurance-based investment products (PRIIPs). ‘ESAs' proposals are a major step towards better information for investors. They eliminate flaws in the provisions on costs and performance that we have been criticising for years,’ says BVI CEO Thomas Richter.
The ESAs’ proposals largely remove the incorrect integration of market developments in the calculation method (‘arrival price’ method) for transaction costs. The ESAs also suggest to make presentation of the components of the fund costs independent of the performance. This adjustment of information on the cost presentation would also make it more in line with requirements in the Markets in Financial Instruments Directive (MiFID II). The ESAs had limited scope to improve the technical regulatory standards for performance scenarios in order not to contradict existing EU legislation. Instead of using statistical procedures with partly misleading results, it should be possible in the future to determine and present investment performance scenarios as examples based on past performance. Otherwise, a link to another document presenting past performance results should be possible. However, current legislation does not yet allow for the presentation of past performance in the information sheet itself.
BVI continues to call for an appropriate extension of the exemption for UCITS beyond the end of 2021 so that European and national legislators can first abolish the established 'key investor information' (UCITS KIDs) at the same time introduce the improved PRIIPs KIDs for fund savers. ‘The coexistence of PRIIPs and UCITS KIDs for a fund would confuse investors due to the different information,’ says Thomas Richter. Fund companies also need to have enough time to carefully implement the new requirements.
In addition, the European Commission has announced that it will carry out a broader review of PRIIPs regulation as part of the work on the new ‘European Union Retail Investment Strategy’ planned for mid-2022. ‘It is good news that the European Commission wants to achieve better alignment of information for investors between PRIIPs, Insurance Distribution Directive and MiFID II. This will really improve investor protection’, says Thomas Richter.
Since 2018, in the EU investors have been provided with a basic information sheet with the most important features, such as the costs and risks of an investment, before buying a packaged investment instrument (including funds, life insurance and certificates). However, all the funds currently using a UCITS KID benefit from an exemption until 31 December 2021 and do not need to produce a PRIIPs KID. BVI has argued strongly for this exception.