In a welcome development for the EEA funds industry, it was confirmed that Members of the European Parliament (EP) on 23 November 2021 voted to adopt:
- PRIIPS legal “quick-fix”: extending the general transition to the revised EU-PRIIPS key information document KID until 31 December 2022
- UCITS legal “quick-fix”: starting from 1 January 2023, a removal of the obligation to produce a UCITS key investor information document (KIID) for non-retail investors when a PRIIPS-KID is issued instead.
The EP are presently working on a delegated act “to clearly define the KID to be presented to consumers”, while EEA member states have until 30 June 2022 to locally transpose revised legislation.
However, many areas remain to be clarified, including:
- Revised NCA rules: UCITS is a long-standing directive, with varying rules applicable in each member state. Each national competent authority (NCA) is now required to confirm their revised consolidated UCITS / PRIIPS notification processes and supply guidance (with time to spare) ahead of 1 January 2023.
- KIID / KID filing disparity: one key part of the UCITS regime unaffected by the recent “quick-fix” is the obligatory NCA filing of each KIID wherever the UCITS is marketed. By contrast, the equivalent PRIIPS-KID filing requirement is optional (until now, enacted only by five member states).
Further complications arise from the UK Government’s decision to apply changes to the local PRIIPS regime on-shored ahead of EU departure on 1 January 2021:
- UK-PRIIPS divergence: although the Financial Conduct Authority (FCA) recently opted to postpone a PRIIPS policy statement until Q1 2022, their proposed UK-KID will be radically different compared to the EU version. Moreover, the FCA have insisted their local regime will apply to EEA manufacturers and distributors “in the same way that they apply to UK businesses.”
- UK-UCITS 5 year exemption: the UK has already extended the UCITS exemption from UK-PRIIPS requirements until 31 December 2026. As before, the UCITS-KIID will continue as the pre-contractual document required for all UK investors.
Meanwhile, the FCA have stated their ongoing expectation of ESG / sustainability information to be included in regulatory documents (including UCITS KIID or PRIIPS KID) presented by fund managers seeking UK authorisation.