EUSIPA pleads for exempting structured PRIIPs from new RTS
23 February 2021 Germany
Image: ekim/adobe.stock.com
EUSIPA has voiced its support for the ambition of the EU PRIIPs Regulation to establish an EU-wide standard for delivering correct, non-misleading and comparable product information to retail investors.
EUSIPA is the European umbrella organisation for issuers of structured investment products on the retail markets.
The aim of Packaged Retail Investment and Insurance-based Products (PRIIPs) European regulation is to standardise pre-contractual information regarding packaged financial products offered to non-professional investors.
The regulation requires the product manufacturer to produce a standardised key information document (KID) containing the necessary basic information to enable retail investors to understand the product, and to compare products.
Earlier this month, the European Fund and Asset Management Association (EFAMA) has demanded an extension of 12 months to the UCITS exemption to ensure proper implementation as the current switch from UCITS KIID to the PRIIPs KID “would be too much of an operational undertaking in the timeframe provided”.
EUSIPA says it recognises the challenges involved in bringing a diverse range of asset classes into the scope of the PRIIPs Regulation.
Although EUSIPA seeks to alert the relevant institutions, it says the redrafted version of the PRIIPs Regulatory Technical Standards (RTS) finalised by the ESAs in early February does not meet the technical requirements across a broad range of packaged investment products.
According to EUSIPA, the implementation of these RTS once more risks providing incorrect and inconsistent information in the KIDs, especially for Category 1 and 3 products.
EUSIPA explains it is “highly concerned” that the envisaged timeline for implementing the new RTS by January 2022 will derail their successful roll-out.
“This is because the ‘Level 1’ review of the PRIIPs Regulation scheduled to bring results in about 18-24 months from now will inevitably lead to yet more changes to the RTS ruleset, if not their complete overhaul,” says the organisation.
Consequently, EUSIPA urges the relevant institutions to seek a constructive solution to the above constraints.
EUSIPA says that this is with the aim to safeguard the EU PRIIPs Regulation’s initial purpose of providing technically correct information in a market-friendly format that enables investors to make informed investment decisions rather than confusing them.
To cater for this, EUSIPA proposes to apply the redrafted RTS to Category 2 UCITS funds only and to hold off applying them to other products until the EU PRIIPs Regulation’s Level 1 review has been finalised.
Heike Arbter, EUSIPA chairwoman, comments: “At the retail point of sale, technically insufficient new RTS and such that allow product manufacturers to apply individual methodologies will render many KIDs incorrect and incomparable.”
Arbter adds: “This will have a detrimental effect on the retail customers’ understanding and willingness to invest. In addition, the uncertainty of yet another change to the RTS ruleset in the near term will deter many distributors from engaging with retail customers on future investment opportunities.”
EUSIPA is the European umbrella organisation for issuers of structured investment products on the retail markets.
The aim of Packaged Retail Investment and Insurance-based Products (PRIIPs) European regulation is to standardise pre-contractual information regarding packaged financial products offered to non-professional investors.
The regulation requires the product manufacturer to produce a standardised key information document (KID) containing the necessary basic information to enable retail investors to understand the product, and to compare products.
Earlier this month, the European Fund and Asset Management Association (EFAMA) has demanded an extension of 12 months to the UCITS exemption to ensure proper implementation as the current switch from UCITS KIID to the PRIIPs KID “would be too much of an operational undertaking in the timeframe provided”.
EUSIPA says it recognises the challenges involved in bringing a diverse range of asset classes into the scope of the PRIIPs Regulation.
Although EUSIPA seeks to alert the relevant institutions, it says the redrafted version of the PRIIPs Regulatory Technical Standards (RTS) finalised by the ESAs in early February does not meet the technical requirements across a broad range of packaged investment products.
According to EUSIPA, the implementation of these RTS once more risks providing incorrect and inconsistent information in the KIDs, especially for Category 1 and 3 products.
EUSIPA explains it is “highly concerned” that the envisaged timeline for implementing the new RTS by January 2022 will derail their successful roll-out.
“This is because the ‘Level 1’ review of the PRIIPs Regulation scheduled to bring results in about 18-24 months from now will inevitably lead to yet more changes to the RTS ruleset, if not their complete overhaul,” says the organisation.
Consequently, EUSIPA urges the relevant institutions to seek a constructive solution to the above constraints.
EUSIPA says that this is with the aim to safeguard the EU PRIIPs Regulation’s initial purpose of providing technically correct information in a market-friendly format that enables investors to make informed investment decisions rather than confusing them.
To cater for this, EUSIPA proposes to apply the redrafted RTS to Category 2 UCITS funds only and to hold off applying them to other products until the EU PRIIPs Regulation’s Level 1 review has been finalised.
Heike Arbter, EUSIPA chairwoman, comments: “At the retail point of sale, technically insufficient new RTS and such that allow product manufacturers to apply individual methodologies will render many KIDs incorrect and incomparable.”
Arbter adds: “This will have a detrimental effect on the retail customers’ understanding and willingness to invest. In addition, the uncertainty of yet another change to the RTS ruleset in the near term will deter many distributors from engaging with retail customers on future investment opportunities.”
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