24 February 2021

PRIIPS: tired of waiting?

Here is our latest update covering interim PRIIPS and UCITS developments.

1. PRIIPS: tired of waiting?

There is still no update available from the European Commission (EC) of how and when the revised PRIIPS Key Information Document conundrum is to be resolved.

The collective retail funds, insurance and banking industries were expecting a prompt turnaround (following the recent exchange of letters between the EC and their supervisory advisors).

We should therefore be wary of latest legal opinion highlighting that the EC has up to May 2021 to decide whether to adopt the ESA’s approved Regulatory Technical Standards. Once endorsed, the RTS is then subject to scrutiny by the European Parliament and Council (for a minimum 3-month period, reportedly extendable up to 6-months, total).

If this seems like a potential long delay, please recall that back in 2016, the financial sector was left waiting until 9th November (i.e. with less than 2 months remaining) until the first PRIIPS legal deferral (12-months) was formally announced. A reminder also that this previous postponement was announced only after the original PRIIPS RTS was rejected by both the European Parliament and its Economic and Monetary Affairs Committee (ECON) a full 2-months previously.

Bearing this in mind, it could be that a similar PRIIPS long wait transpires in 2021 (before the final path ahead for the KID becomes certain), in the worst-case scenario.

2. UCITS: ESMA publish Performance Fees NCA status

Since our last update, ESMA have published a Compliance table to illustrate their national competent authorities’ willingness to administer recently finalised Performance Fee guidelines (applicable also for certain types of AIFs).

In summary, one EU-regulator is stated as NOT complying, in Sweden i.e. the Finansinspektionen (FI).  However, they mention only “…open-ended AIFs… which are allowed to be marketed to retail investors on the basis of the funds being admitted to trading on a regulated market.”  They do not mention any difficulty related to performance fee rules applied to local UCITS funds.

With 5 x other regulators elsewhere (i.e. Spain, Italy, Bulgaria, Hungary and Romania) declaring they will only comply with the rules in due course, this means regional variations for KIID performance fee content may persist for some time.

NB: a reminder that ESMA’s guidelines apply now for any new UCITS funds created, with a 6-month deferral for existing products; ESMA’s measures include direct rules for performance fee-related KIID content to be applied ongoing.

Meanwhile, across the channel: the UK Financial Conduct Authority (no longer directly affiliated to ESMA) had previously defined their local Performance Fee rules in the COLL handbook back in August 2019.

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