1. EEA synopsis: level 1“quick fixes”, level 2 RTS
The feedback period has now lapsed on the European Commission’s proposed “quick fixes” to both the UCITS directive and PRIIPS regulation; these are intended to extend the transition period for a revised Key Information Document (KID) until 30 June 2022, while avoiding ‘a situation where retail investors receive two different pre-contractual disclosure documents in respect of the same UCITS’.
The overwhelming opinion of respondents (including Kneip-member associations EFAMA, ALFI and the BVI) is that a “full” 12-month implementation period is now necessary (i.e. starting from the point of legal publication of the delegated regulation). The finalised timing of the “quick fixes” were no doubt discussed at the Committee on Economic and Monetary Affairs (ECON) meeting earlier this week; presumably, given the existing 31 December 2021 deadline, there may be a formal announcement within a matter of days.
NB: there remains no indication (at this stage) that the continued UCITS KIID disclosure for non-retail EEA investors will be set aside in 2022.
Although the European Supervisory Authorities’ RTS has now been formally adopted by the EC, the due process of scrutiny now underway within the European Parliament and Council may take between 3-6 months to complete. Meanwhile, assuming the adopted RTS will be accepted by the EU institutions in its present form (unlike 5 years ago), most European fund firms are now finalising their respective RTS gap analyses to highlight the necessary changeover efforts required within the time to be made available.
Specific areas of attention will continue to include:
- Specific KID provisions now applicable to various UCITS, AIFs (including investment compartments, share classes, fund of funds, master / feeders and structured investments)
- Updated multi-option products (MOPs) disclosure rules
- Fundamental changes to the future performance calculation methodology (covering ‘favourable’, ‘moderate’, and ‘unfavourable’ outcomes) including historical data instances, revised presentation rules and narrative elements
- Modified costs disclosure methodology (specific requirements per investment category) and expanded presentation rules
- Past performance supplementary calculation and presentation (i.e. to be processed and made available offline, with KID referral only)
Elsewhere, FinDatEx are now in the final stages of revising their European PRIIPS template (EPT) used extensively throughout the industry, with EPT 2.0 set for public consultation before end-October 2021.
2.UK latest: FCA consultation
Over in the UK, today is the final day for FCA’s proposed UK-PRIIPS KID changes consultation.
Contrary to the ESAs’ extensive re-writing of their original future performance methodology and presentation rules, the FCA propose instead to delete this entire section from their UK-RTS (replaced by an ‘appropriate performance information’ summary narrative). While the FCA include a placeholder for a past performance graphical representation (i.e. for direct inclusion in the UK-KID) they recommend this is left aside for now, given “insufficient” historical data, information currently available. The FCA also propose an obligatory increase of summary risk indicators (SRIs) deemed “misleading”, alongside revisions to some transaction cost calculation rules (e.g. OTC bonds, index tracking funds).
The publication of respondent feedback is keenly awaited (again, most likely in a matter of days, given the FCA’s extremely challenging effective date set for 01 January 2022).
The Financial Times reported today the advance opinion of the Personal Investment Management & Financial Advice Association (PIMFA), who recommend a “more radical approach” to the entire PRIIPS regime was “urgently” needed instead of revisions to the KID.
Meanwhile, the FCA’s proposed application of an extended UCITS 5-year exemption to UK and EEA products presents another major challenge to firms marketing the same funds in both regimes.