January 1st, 2023, marked a significant date for professionals in the fund management industry, particularly in the European Union. This day signified the conclusion of the UCITS exemption for PRIIPs, alongside the implementation of the amended PRIIPs Delegated Regulation ((EU) 2021/2268). The amendments primarily focused on enhancing performance scenarios for Category 2 PRIIPs, introducing a past performance chart, and mandating the monthly disclosure of performance scenarios.
The PRIIPs Regulation is undergoing a review. Just before Easter, the Committee on Economic and Monetary Affairs released a report outlining substantial changes to the PRIIP Key Information Document (KID). These revisions aim to improve transparency, comparability, and sustainability in the investment market, while also strengthening consumer protection:
An increase of the maximum number of pages from 3 to 4, and the addition of a new section on sustainability (“How environmentally sustainable is this product?”). This section will include, among others, information on (1) environmental sustainability levels, (2) greenhouse gas emissions, (3) principle adverse impacts and (4) a link to the SFDR website disclosures.
The regulatory preference to make KIDs available will be in electronic format with a free option for a paper version. This digitalisation should facilitate the information access to retail clients. The electronic format of the KID could (ie not mandatory) be provided by means of a dynamic online tool on the website of fund managers with the possibility to customize both the holding period and the invested amount to the investor’s personal preferences. In all cases, the standard Key Information Document should remain accessible on the website via a link. In case the KID is not available on the website, it should be provided upon request within 2 working days.
An independent online comparison tool, to be developed by the regulators, for PRIIP KIDs will enable investors to compare costs, performance, risk, recommended holding periods, fees, and certain qualitative features. It will be made available under the European Single Access Point and a link to this tool should be disclosed in the KID. Under the provisional agreement, this platform is expected to be available from summer 2027 and will gradually phased in.
Where PRIIP Manufacturers review the PRIIP KID (for instance because of an SRI change), previous versions should be stored and made available to retail investors upon request.
PRIIPs that are no longer made available and cannot be purchased on a secondary market will be exempted from the annual obligation to update their KID PRIIP.
Where the calculated forward-looking performance scenarios are considered misleading, past performance should be included.
Specific warnings about risks associated with complex instruments or IBIPs are included, as defined in MiFID II or IDD.
A more streamlined representation of MOP KIDs is needed as retail investors face difficulties in identifying the total costs when information about various investment options is scattered across different investment options. In addition, PRIIP manufacturers should facilitate comparison between different underlying options through a summary table or a filtering tool.
With regards to timing… The revised PRIIPS Regulation will enter into force 18 months after its publication in the Official Journal of the European Union, or the adoption of the revised regulatory technical standards (still to be prepared by the ESAs) whichever happens last.