After a development phase of several years, the European Parliament and the Council published the Regulation (EU) No 1286/2014 on key information documents (KID) for packaged retail and insurance-based investment products (PRIIPs) on 26th November 2014.
It will take effect upon December, 31st 2016.
What is the objective of the regulation?
The objective of the regulation is to create a requirement for a standardised short-form document to be provided to retail investors in order to enable them to understand and compare the key features and risks of PRIIPs products.
Who & what will be affected?
The new regulation concerns asset management, banking and insurance.
It will primarily affect :
structured financial products, such as options, which are packaged in insurance policies, securities or banking products;
financial products whose value is derived from reference values such as shares or exchange rates (derivatives);
close-ended and open-ended investment funds;
investment-type insurance products, such as for-profit and unit-linked life insurance and hybrid products; and
instruments issued by special purpose vehicles.
UCITS already providing key investor information documents (KIID) under Commission Regulation (EU) No 583/2010 are subject to exemption until December 31st, 2019. After this date, the PRIIP KID has to be provided.
FORM & CONTENT OF THE PRIIP KID
The PRIIP KID is inspired by UCITS KIID. However, it includes other requirements, sections and methodologies. It is a brief, standardized document concisely written with a maximum of three A4-paper pages.
On 11th November 2015, the European Supervisory Authorities published the awaited Draft Technical Regulatory Standards clarifying the details shown in the figure below.
KID is to be written in any one of the official or accepted EU member state languages where the PRIIP is distributed.
It must be underlined that the PRIIP manufacturer (i.e. investment firms that design investment products) may be held liable if a retail investor suffers damage as a result of a key information document which does not meet the requirements of the PRIIPs Regulation and he or she has therefore made an incorrect investment decision. The Regulation places the burden of proof in a legal dispute on the manufacturer, who must show that the key information document complies with the PRIIPs Regulation with regard to presentation, content, review and provision of the key information document.
DIFFERENCES COMPARED TO UCITS KIIDS
On April 7th, 2016, the Joint Commission of the European Supervisory Authorities (composed of the EIOPA, EBA and ESMA) published the final Draft Regulatory Technical Standards (RTS) on the content and presentation of the KIDs for PRIIPs.
Our experts have analysed the RTS and summed up some of the differences between UCITS KIIDs and PRIIP KIDs for you in the table below.
At the same time, our specialists have conceived the PRIIP KID reporting tool with a self-explanatory and easy-to-use tree structure. The tree structure exactly reflects the legally binding PRIIP KID section order.
STAY AHEAD OF THE COMPETITION & PREPARE WITH ACARDA’S AREP PRIIP KID ENGINE NOW
From our prior experience with similar regulations such as UCITS KIID and AIFMD reporting, we have realized that market actors may need up to a year or even more to ensure as smooth a transition as possible. They need to properly select, implement, and launch a regulation-compliant reporting solution, thus requiring several issues to be resolved: e.g. ensure data collection, allocate staff while keeping up the daily business processes.
Consequently, the time to tailor and implement your PRIIP KID solution is now!
FEATURES & SERVICES FOR YOUR PRIIP KIDS
Our web-based arep PRIIP KID solution was developed on the basis of our well-proven UCITS KIID reporting module. The PRIIP-KID reporting is provided with workflow processes which have given reliable service in professional use.
The arep PRIIP KID solution masters for example following challenges:
- Data pool to gather, transform and cleanse all relevant data, identify gaps, assess data quality and control changes on a regular basis, at least in accordance with the frequency prescribed by law.
- Data monitoring for indicator changes, e.g. NAV or volatility change above threshold affecting risk indicator, significant portfolio structure change by asset class affecting risks and purpose of product.
- Clearly structured overview screen showing various alerts when action is required: e.g. missing figures, indicator change, retranslation requirements or due date proximity.
- Classification and calculation of the summary risk indicator based on data provided by clients as well as preparation of performance scenarios.
- Language compatibility process for translation of the document, e.g. in case the investment product shall be distributed to additional countries in their respective languages.
- Approval process management supporting the complete process chain of data management and new document issuance
- Production of final key information documents, i.e. change protected documents in PDF format, as well as provision of internal versions (e.g. as spreadsheet, Word document or XML file).
- Document archive for control of generated documents and document versions.
acarda’s offer ranges from application service provision in our certified data centre to managed services.