[Newsflash n. 25]

 

Following the rejection by the European Parliament (in September 2016) of the previous draft, on 8 March 2017 the European Commission published a revised version of its “level 2” Regulatory Technical Standards (“RTS”) under the Packaged Retail and Insurance-based Investment Products Regulation (“PRIIPs Regulation”).

In the revised RTS, the Commission has implemented most of the amendments proposed by the European Parliament and the Council, thus modifying the drafting instructions for Key Information Document (“KID”) with particular regard to:

• Comprehension alerts
  The KIDs of PRIIPs qualifying as complex products pursuant to MiFID II and Insurance Distribution Directive now shall include a specific comprehension alert.

• Multi-option products (“MOPs”)
  Until 31 December 2019, with respect to MOPs with underlying investment options on UCITS (and certain non-UCITS funds), firms are no longer obliged to provide PRIIPs-like information for underlying options but are entitled to use a Key Investor Information Document (KIID) drafted pursuant to UCITS Directive to inform clients about such investment options (even when it includes information on past performance).

• Performance scenarios – stress scenario
  A new fourth mandatory “stress” scenario has been added to the existing three (favourable, moderate and unfavourable), providing an overview of the foreseen impact on the product of extreme market conditions.

• Performance scenarios – assumption for expected return
  Despite objections from the Parliament, the Commission decided not to modify the calculation method to be used for future performance scenarios, which will continue to be calibrated by reference to historical returns although past performance of the PRIIP is not itself envisaged in the KID (despite the requests from market operators).

• Administrative costs
  Firms now have to disclose any administrative cost linked to the biometric components of insurance-based products (i.e. the so-called “biometric risk premiums”, paid by retail investors and intended to cover the statistical risk of benefit payments from insurance coverage).

Notwithstanding the revision, no amendment has been adopted in order to better clarify when a KID should be updated and how such updates should be communicated.

The RTS are now under scrutiny by the European Parliament and the Council for a period of maximum of three months. However, such scrutiny period is likely to be reduced by an ad-hoc statement or due to expiry with no objections, since both institutions were consulted during the drafting phase. Assuming they are approved, the RTS will enter into force 20 days after their publication on the EU Official Journal and will be applicable, as the PRIIPs regulation, starting from 1 January 2018.

Here you can find the full text of the new Regulatory Technical Standards and the relevant Annex.

Please do not hesitate to contact us should you need any further clarification on the above and any other PRIIPs related matters.

 

Contacts:

Vito Vittore
Senior Partner

Elena Pagnoni
Of counsel

Luigi Bonifacio
Associate