PRIIPs regulation: what it is and how to comply

Nov 22nd '16

Are you aware of the Regulation on Key Information Documents for Packaged Retail and Insurance-based Investment Products (PRIIPs)? This month, the European Commission proposed extending the date that the PRIIPs comes into force. Here we look at PRIIPs, what it covers and what financial services firms need to do to comply.


What is PRIIPs?

The PRIIPs regulation is a key piece of legislation that aims to improve the quality of information provided to consumers. It introduces a standardised factsheet, known as a Key Information Document (KID), which is designed to present the main features of an investment product in a simple and accessible manner.


The latter applies to packaged retail and insurance-based investment products. It covers collective investment schemes as well as other ’packaged’ investment products offered by banks or insurance companies.


The aim of the KID is to allow consumers – in the words of the Commission – to: ‘be able to easily compare the potential risks and rewards of investment products, funds and investment-linked insurance policies.’


What extension is the European Commission proposing?

On 9 November, the Commission proposed that the application date for the regulation is extended by one year.


It had been due to come in as of 1 January 2017. The delay gives issuers and distributors of PRIIPs products until 1 January 2018 to put the provisions in place.


Why has it been delayed?

The reason given for this extension was the desire to ensure ‘a smooth implementation for European consumers and to ensure legal certainty for the sector’.


Essentially, the delay in the regulation’s introduction is due to the European Parliament’s rejection of the Regulatory Technical Standards (RTS) that underpin the format and methodology used to compile the KID.


The European Commission (not surprisingly, as they wrote the regulation) believe that it is ‘sufficiently clear as well as directly applicable on its own’.


But concede that ‘its objectives would be better served by having the RTS on Key Information Documents already in place. In particular, the RTS will be important in offering consumers the benefit of having KIDs that are more easily comparable and standardised.’


Nest steps for the regulation

The European Commission is now working with the three European Supervisory Authorities (ESAs) to resubmit the revised Regulatory Technical Standards (RTS).


The ESAs have six weeks to resubmit the revised RTS to the Commission. They will have to be adopted by the Commission and then scrutinised by the European Parliament and the Council. The expectation is that the revised PRIIPs framework should be in place during the first half of 2017 and apply as of 1 January 2018.


Be prepared for the regulations when they come into force

PRIIPs may have been delayed, but firms can get ahead of the game by ensuring they’re prepared now for its requirements.


Not only that, but as the principles behind it are sound – and are mirrored in much of the existing regulation from the Financial Conduct Authority – it’s in firms’ and consumers’ interests to meet the standards before they are required.


In the words of Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue at the EC, PRIIPs will ‘provide consumers with accessible and transparent information on complex investment products.’


This ties in neatly with the FCA’s own objectives for making financial products and their communications ‘fair, clear and not misleading’ and its objective that customers are treated fairly.


Many firms already produce Key Information Documents or similar communications for existing and prospective customers. You can make sure they embrace best practice principles by:


  • Using only data that’s 100% accurate. Ensuring AuM data, performance figures and other financial statistics are correct is a big part of providing transparent and fair information. Locking down the latest information in a slide or document library that your Sales and Marketing teams can easily access is one good solution.
  • Ensuring your risk warnings and disclaimers are correct and follow the rules on prominence.
  • Working with your Marketing and Sales teams to help them write Compliance-ready content, to reduce the time spent on reviews and approvals.
  • Understanding the FCA’s objectives around desired consumer outcomes and making sure you achieve them.


Source: Perivan Technology


How we can help!

If you are unsure how your activities fit within the rules mentioned within this article, please take advantage of our Financial Promotion Review service or explore our range of services including compliance support.


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