02 February 2021

EFAMA: PRIIPs – a further extension of the UCITS exemption has now become essential

A flawed review process not tackling the heart of the issue. EFAMA has always made it clear that a revision of the PRIIPs RTS falls short of conducting a proper Level 1 review. A review that is explicitly required by the Level 1 Regulation and is overdue for more than one year.

Indeed, this outstanding review is essential to, once and for all, settle the dilemma at the heart of the PRIIP KID: How can you create a fully homogenised retail investor document involving hugely diverging investment and insurance products while, at the same time, keeping the information both meaningful and not misleading?

In our opinion, both goals can not be fully achieved simultaneously and some trade-off will have to be found between meaningful and comparable information. This conundrum cannot be solved only by making technical changes at RTS level – despite the ESAs’ ongoing best efforts. We, therefore, understand and support industry associations and consumer representatives voicing their frustration that this issue is not tackled head-on through a Level 1 review.

Despite all these concerns, it looks likely that the Commission will push for the adoption of RTS changes ahead of a wider distribution review which is still several years away. If the Commission cannot be swayed, the only alternative is to fix some of the current KID’s biggest flaws before fund investors are confronted with the PRIIP KID instead of the current and well-functioning UCITS Key Investor Information Document (KIID). The ESAs’ revised RTS are, therefore, a small step in the right direction and are, within the impossible confines imposed by the Level 1 Regulation and the Commission’s mandate, as good as they can get. For now!

The revised RTS have already been delayed for more than one year with 31 December 2021 deadline looming
Nevertheless, the Commission’s original plan was to publish these new RTS by early 2020, ensuring that the financial industry would have sufficient time to implement wide-ranging changes before the end of 2021. This year’s deadline was originally meant as the official extension of the PRIIP KID to retail funds after all the outstanding issues had been settled through the Level 1 review. As of today, however, the RTS are delayed by more than one calendar year and there is still not enough clarity as to how they will ultimately look or when this process will be finalised.

Time has already run out to allow for proper implementation
With only eleven months remaining, there is not nearly sufficient time left for fund managers (and other product manufacturers) to properly implement the envisaged wide-ranging changes, as we explain in more detail below.

EFAMA

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