New KID requirements under PRIIPs now take effect in 2023

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The European Commission has published a new Delegated Regulation postponing the application date of certain PRIIPs-related disclosures. In this article, we provide the key details and outline what this means in practice.

Packaged retail and insurance-based investment products (PRIIPs) include the range of investment products marketed to retail investors that are subject to investment risk, including options, derivatives, funds and other products.

This latest Delegated Regulation, adopted on 17 March and published on 24 June 2022, revises both Delegated Regulation (EU) 2017/653, otherwise known as the PRIIPS KID Delegated Regulation, and the subsequent Delegated Regulation (EU) 2021/2268.

The latter amended the regulatory technical standards (RTS) laid out in the PRIIPs KID Delegated Regulation in relation to, among other things, the presentation and contents of key information documents (KIDs), including the methodologies for the calculation and presentation of risks, rewards and costs. It entered into force on 9 January 2022, with the new requirements originally set to apply from 1 July 2022.

However, the recently published Delegated Regulation (EU) 2022/975 postpones this application date and also prolongs the transitional arrangements under Article 14(2) of the PRIIPs KID Delegated Regulation. These arrangements allow PRIIPs manufacturers that offer investment funds as the only underlying investment options, or alongside other investment options, to continue using UCITS key investment information documents (KIIDs) to provide specific information for the purposes of disclosures relating to PRIIPs.

The transition period now extends to 31 December 2022, with the new RTS requirements coming into effect the following day on 1 January 2023.

What’s the situation in the UK?

In parallel to the changes the EU are making, the UK is adopting its own PRIIPS KID Regulation with its own transition period, which also comes to an end on 31 December 2022.

The changes between the UK and the EU regulation, as shown in the RTS and updated UK Handbook rules, mean any PRIIPs manufacturers marketing their products to retail investors in both the EU and the UK will have to publish two separate KIDs once the transition period ends, as of 1 January 2023.

For more on the history of PRIIPs regulation in the UK, read this article.

What is a PRIIPs KID?

A PRIIPs KID is a pre-sale disclosure document intended to protect retail investors by providing them with the information needed to make an informed investment decision. Formatting of KIDs is heavily prescribed and standardised so retail investors can easily compare products.

Broadly, the key information to be disclosed in a PRIIPs KID includes:

  • Nature and features of the investment product
  • Costs and risk profile of the product
  • Performance information

Practical impact of the extension

  • Under the extension, firms gain additional time to transition from UCITS KIIDs to PRIIPs KIDs. Management companies, investment companies and individuals advising on or selling both UCITS and non-UCITS now have additional time to prepare and implement the obligation to publish revised KIDs
  • There is also additional breathing room for the asset management industry to adjust to the new PRIIPs RTS, which includes a modified methodology for performance scenarios, changes to the presentation of transaction costs, and other amendments
  • For retail investors, Member State authorities shall not require investment companies or management companies to publish both PRIIPs KIDs and UCITS KIIDs
  • For non-retail investors, UCITS investment companies and management companies can choose whether to publish a UCITS KIID or a PRIIPs KID until the revised date.

IQ-EQ’s Regulatory & Compliance team is always up to date on PRIIPs regulation and is actively delivering KID support to fund managers in the UK and across Europe. Contact our team to learn more and discuss your requirements.