By 31 December 2018, the Commission is expected to review the PRIIPs regulation. Funds wonder whether to expect an extension of the one-year exemption from providing a UCITS KIID (or KIID-like) document.
1 January 2018 was the application date of the regulations (levels 1 and 2) on the so-called packaged retail and insurance-based investment products, or PRIIPs. Discussions around PRIIPs actually started about ten years ago, when the European Commission had asked for feedback concerning “substitute retail investment products”. Since then, members of ALFI working groups have provided feedback on legislative drafts, public consultations and documents to the Commission and EFAMA. ALFI also regularly exchanged views on PRIIPs with other Luxembourg trade associations (ABBL and ACA) in order to ensure a coherent approach for Luxembourg.
Dedicated working groups were created to cover topics such as costs and charges, risks, performance scenarios and general aspects concerning PRIIPs. ALFI worked on Q&A typically relevant from a fund’s perspective. More than seventy meetings were held before the first issue of ALFI’s PRIIPs KID Q&A was released alongside an ALFI Leading Edge Conference on investor protection in April 2017. It was followed by two further editions in May and October 2017.
It seems however that the work on PRIIPs is not yet done. Looking at the key information documents (KIDs) published since 1 January 2018, in particular costs and performance scenarios are neither precise nor easy to compare, which means at least a partial failure of the PRIIPs regulation’s primary goal. The fund industry, highly concerned about the proposed methodologies from the start of the discussion, had suggested alternative and more practical solutions, ensuring the availability of data and cost reduction. The ESAs and the European co-legislators are currently analysing evidence received from the industry on how PRIIPs works in practice.
Senior Legal Advisor, ALFI