[Newsletter n. 2]
On 9 December 2015, ESAs (EBA, EIOPA and ESMA) held a public hearing in Frankfurt to discuss the joint consultation launched on 11 November 2015 to gather stakeholders’ views on the draft Regulatory Technical Standards (“RTS”) on the content and presentation of the Key Information Documents (“KID“) for packaged retail and insurance-based investment products .
ESAs are required to develop the RTS pursuant to Regulation (EU) No 1286/2014 (“PRIIPs Regulation”). These RTS focus on the following points:
- presentation and content of the KID, including methodologies for the calculation of risks, rewards and costs;
- review, revision and republication of KID;
- conditions for fulfilling the duty to provide the KID;
The draft RTS contains specific Annexes on: template of KID, methodology underpinning the presentation of risk, presentation of summary risk indicator, performance scenarios, methodology for the calculation and format of presentation of costs.
According to the proposed regulatory technical standards, the KID shall contain the following information categorised according to the sections below:
What is this product?
The nature and main features of the PRIIP, including the type, its objectives and the means for achieving them; a description of the retail investor type (in particular in terms of the ability to bear investment loss and horizon too); where the PRIIP offers insurance benefits and related details; and the term of the PRIIP;
What are the risks and what could I get in return?
A brief description of the risk-reward profile comprising the following elements:
- a summary risk indicator;
- the possible maximum loss of invested capital;
- appropriate performance scenarios, and the assumptions made to produce them;
- information on conditions for returns to retail investors or built-in performance caps; and
- a statement that the tax legislation of the retail investor’s home Member State may have an impact on the actual pay-out;
What happens if [the manufacturer] is unable to pay out?
A brief description of whether the related loss is covered by an investor compensation or guarantee scheme and if so, which scheme it is, the name of the guarantor and which risks are covered by the scheme and which are not.
What are the costs?
The costs associated with an investment in the PRIIP, comprising both direct and indirect costs to be borne by the retail investor, including one-off and recurring costs, presented by means of summary indicators of these costs and, to ensure comparability, total aggregate costs expressed in monetary and percentage terms, to show the compound effects of the total costs on the investment.
How long should I hold it and can I take money out early?
An indication of the recommended and required minimum holding period and other information on disinvestment or early termination before maturity.
How can I complain?
Information about how and to whom a retail investor can make a complain about the product.
Other relevant information
A brief indication of any additional information documents, excluding any marketing material.
The KID shall be drafted by PRIIP manufacturers and it will constitute a pre-contractual information, whose information shall be accurate, fair, clear and consistent with any binding contractual documents.
Comments on the Consultation Paper can be submitted by 29 January 2016. The final version of the RTS shall be submitted for endorsement by the European Commission by 31 March 2016.
The text of the Joint Consultation Paper is available at the following link: https://goo.gl/6Qp15J
Please do not hesitate to contact us should you need any assistance in submitting your response or any further clarification on the discussion paper.
Contacts:
Vito Vittore
Senior Partner
Elena Pagnoni
Of counsel
Valentina Biagioli
Associate
