Regulatory Technical Standards on the content and presentation of the KIDs for PRIIPs

Status: Final draft adopted by the EBA and submitted to the European Commission

The European Supervisory Authorities (ESAs) are mandated by the Regulation on Key Information Documents for Packaged Retail and Insurance-based Investment Products (PRIIPs Regulation) to develop draft Regulatory Technical Standards (RTS) on the content and presentation of the KIDs for PRIIPs. The aim of the KIDs is to provide EU retail investors with consumer-friendly information about investment products with the ultimate aim of improving transparency in the investment market.

ESAs publish recommendations on changes to the PRIIPs Key Information Document

ESAs publish recommendations on changes to the PRIIPs Key Information Document

08 February 2019

The European Supervisory Authorities (ESAs) today published their final recommendations following a consultation on targeted amendments to the Delegated Regulation covering the rules for the Key Information Document (KID) for Packaged Retail and Insurance-based Investment Products (PRIIPs).

Having taken into account the feedback received and considering in particular the implications of a possible decision by the European Co-legislators to defer the application of the KID by certain types of investment funds beyond 2020, the ESAs decided the following: 
To not propose targeted amendments at this stage 
To initiate a more comprehensive revision of the PRIIPs Delegated Regulation to be undertaken during the course  of 2019, including to launch a consultation on the draft Regulatory Technical Standards
 
Furthermore, the ESAs issued a Supervisory Statement regarding the performance scenarios to promote consistent approaches and improve the protection of retail investors prior to the conclusion of the review.  The ESAs consider that there is a risk that retail investors are provided with inappropriate expectations about the possible returns they may receive. Therefore, the ESAs recommend PRIIP manufacturers to include a warning in the KID to ensure that retail investors are fully aware of the limitations of the figures provided in the performance scenarios.

Background

The Key Information Document (KID) for Packaged Retail and Insurance-based Investment Products (PRIIPs) is a mandatory, three-page A4 information document to be provided to consumers before purchasing a PRIIP. PRIIPs include for example funds, structured products, unit-linked and with-profits life insurance contracts, and structured deposits.
 
On 1 October 2018, the ESAs wrote a letter to the European Commission expressing their concerns regarding the possibility of duplicating information requirements for investment funds from 1 January 2020 and the importance of legislative changes to avoid such a situation, including a targeted review of the PRIIPs Delegated Regulation.
 
Subsequently, on 8 November 2018 the ESAs published a consultation paper proposing targeted amendments that would allow the KID to be applied to all types of investment funds and to address key issues that have arisen since the implementation of the KID, in particular concerning the performance scenarios.
 
In parallel with the ESAs' work, the European co-legislators also initiated discussions on legislative changes relating to the application of the KID by certain investment funds and the timing of a review of PRIIPs.  When publishing the consultation paper, ESAs stated that they would take into account the latest information regarding these political discussions when deciding upon their final proposals. 
 
The Supervisory Statement is issued under Article 29(2) of the ESAs' Regulations as a convergence tool to promote common supervisory approaches and practices.
 
The PRIIPs Regulation (No 1286/2014) defines the main rules and principles for KIDs. It is supplemented by a Delegated Regulation (2017/653) specifying the presentation and contents of the KID, which is based on Regulatory Technical Standards that the ESAs were mandated to develop.
 
Performance scenarios are included in the Section of the KID titled "What are the risks and what could I get in return?" They indicate how the investment could perform under various different scenarios.

 

 

Press contacts:

Franca Rosa Congiu

E-mail: press@eba.europa.eu - Tel: +33 1 86 52 7052

ESAs finalise Key Information Documents for retail investors in the EU

ESAs finalise Key Information Documents for retail investors in the EU

07 April 2016

The Joint Committee of the European Supervisory Authorities (EBA, EIOPA, ESMA - ESAs) has finalised its proposal for regulatory technical standards (RTS) on Key Information Documents (KIDs) for Packaged Retail and Insurance-based Investment Products (PRIIPs).
 
  • Innovative and pioneering new approach on risks, performance and costs developed jointly by ESAs.
  • For the first time simple and comparable information for retail investors in all the financial sectors across the EU.
  • Strong foundation for enhanced consumer protection. 
The proposed KIDs provide retail investors for the first time across the EU with simple and comparable information on investment products in the banking, insurance and securities sectors. A 3-page document increases the transparency and comparability of information about the risks, performance and costs of these products. The new rules will contribute to enhancing the confidence and strengthening the protection of EU consumers of banking, insurance and securities products.  
 
Gabriel Bernardino, Chairman of EIOPA and current Chairman of the Joint Committee, said:
 
"These new rules prepared jointly by the ESAs are a major step forward for consumers. They are an innovative and pioneering new approach to risk, performance and cost disclosures that we believe lays a strong foundation for the future. Now, for the first time, consumers can easily compare different products and make informed investment decisions fitting their particular needs
.   
The ESAs reached a significant milestone in managing to transform high-level EU legislative principles into a set of practical cross-sectoral rules. On behalf of the Joint Committee, I would like to thank all the stakeholders for their extensive contributions throughout the entire process."
 
The new rules benefited from the public feedback received by the ESAs on two Discussion Papers and a Consultation Paper, from extensive consumer testing, which was facilitated by the European Commission across a sample of Member States, and from a consultative expert group.
 
The new rules address the content and presentation of the KIDs and include:
  • a common mandatory 3-page template for the KID, covering the texts and layouts to be used (see Annexes I, III, V and VII of the Report);
  • a summary risk indicator of seven classes for the risk and reward section of the KID;
  • a methodology to assign each PRIIP to one of the seven classes contained in the summary risk indicator, and for the inclusion of additional warnings and narrative explanations for certain PRIIPs;
  • details on performance scenarios and a format for their presentation, including possible performance for different time periods and at least three scenarios;
  • costs presentation, including the figures that must be calculated and the format to be used for these i.e. in both cash and percentage terms;
  • specific layouts and contents for the KID for products offering multiple options that cannot effectively be covered in three pages;
  • rules on revision and republication of the KID, to be done at least each year; and
  • rules on providing the KID sufficiently early for a retail investor to be able to take its contents into account when making an investment decision.
The new rules have been submitted to the European Commission for endorsement. They will come into force on the 31 December 2016.
 
Notes for editors
  1. JC/CP/2015/073 Joint Consultation Paper – PRIIPs Key Information Documents.
  2. A report on the Consumer Testing can be found here.
  3. JC/DP/2015/01 Technical Discussion Paper - Risk, Performance Scenarios and Cost Disclosures In Key Information Documents for PRIIPs.
  4. JC/DP/2014/02 Discussion Paper - Key Information Documents for Packaged Retail and Insurance-based Investment Products (PRIIPs).
  5. The PRIIPs Regulation defines the main rules and principles on KIDs and mandates the Joint Committee to develop draft RTS on the content and presentation of the KIDs, as well as on the timing of delivery of the KIDs.
  6. PRIIPs cover the range of investment products marketed to retail investors, a market worth up to €10 trillion in the EU according to European Commission estimates. They include structured products, whatever their underlying legal form and including structured deposits, insurance-based investments (including unit-linked and with-profit products), and investment funds.
  7. The Joint Committee is a forum for cooperation that was established on 1 January 2011, with the goal of strengthening cooperation between the three European Supervisory Authorities (ESAs) (European Banking Authority, European Securities and Markets Authority and European Insurance and Occupational Pensions Authority).
  8. The Joint Committee allows the ESAs to cooperate in ensuring consistency in their practices. In particular, the Joint Committee works in the areas of supervision of financial conglomerates, accounting and auditing; micro-prudential analyses of cross-sectoral developments, risks and vulnerabilities for financial stability; retail investment products and measures combating money laundering.
 

Press contacts:

Franca Rosa Congiu

E-mail: press@eba.europa.eu - Tel: +33 1 86 52 7052

ESAs share initial views on consumer-friendly Key Information Documents on investment products across the EU

ESAs share initial views on consumer-friendly Key Information Documents on investment products across the EU

17 November 2014

The Joint Committee of the three European Supervisory Authorities (EBA, EIOPA and ESMA) published today a Discussion Paper on Key Information Documents (KIDs) designed to help retail investors in the EU better understand and compare packaged retail and insurance-based investment products (PRIIPs) across the EU. The ESAs are looking for feedback from all concerned stakeholders by 17 February 2015.

While retail investment products can help EU citizens in building-up savings and also contribute to capital markets that support economic growth in the EU, currently, essential information about the risks, rewards and costs of investment products can be overly complex, difficult to find, and hard to compare for retail investors across the EU.

The ESAs are mandated by the Regulation on Key Information Documents for Packaged Retail and Insurance-based Investment Products (PRIIPs Regulation) to develop draft Regulatory Technical Standards (RTS) on the content and presentation of the KIDs for PRIIPs. The aim of the KIDs is to provide EU retail investors with consumer-friendly information about investment products with the ultimate aim of improving transparency in the investment market. In order to ensure that all views and options are taken into consideration when developing the RTS, the ESAs are now seeking stakeholders' views on how these standardised KIDs should be developed.

This Discussion Paper is a first step in the ESAs' joint work on the broad issues to be considered in developing the RTS. The paper also includes a series of possible consumer-friendly information templates aimed at providing retail investors with clear and comparable information on the key features of investment products, including on what they might gain if they invest, the risks they are taking, and all the costs they will have to incur.

The discussion paper is available on the websites of the three ESAs: EBA, ESMA and EIOPA. Comments to this discussion paper can be sent clicking on the "send your comments" button.

Legal basis and next steps

The Discussion Paper has been developed according to the Regulation on Key Information Documents for Packaged Retail and Insurance-based Investment Products (PRIIPs Regulation), agreed in April 2014, which introduces a Key Information Document (KID) that will provide retail investors with information on investment opportunities in the EU. The PRIIPs Regulation defines the main rules and principles on KIDs and mandates the Joint Committee of the ESAs to develop draft RTS on the content and presentation of the KIDs, as well as on the timing of delivery of the KIDs.

The Joint Committee is expected to submit the RTS to the Commission at the beginning of 2016 and the new KIDs will start to be used at the end of 2016.

A more technical Discussion Paper will be tabled in the spring of next year, followed, after the summer, by a Consultation Paper on the final rules.

Note to the editors

Packaged Retail and Insurance-based Investment Products (PRIIPs) cover the range of investment products marketed to retail investors, a market worth up to €10 trillion in the EU according to European Commission estimates.  They include structured products, whatever their underlying legal form and including structured deposits, insurance-based investments (including unit-linked and with-profit products), and all kinds of investment funds. Ordinary holdings of shares or bonds and certain pensions are not covered. PRIIPs offer benefits for consumers – such as risk diversification and mitigation, and the chance to invest in assets that might otherwise be difficult for the ordinary consumer to access. But the products can often also be very complex and difficult to compare.

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Press contacts:

Franca Rosa Congiu

E-mail: press@eba.europa.eu - Tel: +33 1 86 52 7052