22 June 2020

PRIIPS: EU stalemate

This week, the troika of European Supervisory Authorities sent a letter to the European Commission.

By Mario Mantrisi

The Packaged retail investment and insurance products (PRIIPS) regulation is a piece of EU legislation with troubled origins.

Last year, as a means to rectify matters, the three EU Supervisory Authorities (ESAs: i.e. ESMA, EIOPA, EBA) launched a consultation to gauge opinion on their suggested changes to the current Key Investor Document at centre of the PRIIPS regulation. Their initial plan was for this exercise to yield a revised set of Regulatory Technical Standards (RTS) – including amendments to secondary [level 2] legislation – for supply to the European Commission,  shortly after end-Q1 2020.

However, since the consultation ended in January, there has been enormous industry and media speculation on how the ESA proposals could be made to reconcile with the demands of the funds market stakeholders (articulated in some of the notable responses supplied). Up until now, the draft RTS remained unpublished.

On Tuesday 21 July 2020, the ESAs announced their letter to the EC, regretfully notifying them they could not deliver a finalised RTS, given insufficient EIOPA board members able to approve their latest collective efforts (attached to the letter “for transparency reasons”).

Some board members had argued that a partial revision of the PRIIPs Delegated Regulation was inappropriate ahead of a comprehensive review of the entire [level 1] regime (i.e. as stipulated in the original 2014 PRIIPs Regulation). Others indicated their preference for the past performance graph from UCITS key investor information document (KIID) to be included in the PRIIPs KID for investment funds, which was shared also by the 3 x ESA co-signatories.

As a result, this unprecedented state of affairs can only be resolved by the European Commission. The EC was also recently recommended by the expert CMU High-level forum to undertake a review of the PRIIPS regulation “as soon as possible”.

Moreover, even if the EC stand ready to act decisively, there are additional challenges ahead in the shape of European Parliamentarians (reportedly citing the continuing pandemic as a key reason to obstruct any legislative changes to current PRIIPS performance rules).

The fate of the current PRIIPS KID, including links to UCITS funds (marketed to retail and professional investors) exempt until 31 Dec 2021 and the separate KIID, remains uncertain.

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