In the middle of the European Supervisory Authorities’ (ESAs) consultation on PRIIPs KIDs, there was cross-party agreement in the European Parliament’s Economic and Monetary Affairs Committee (ECON) that the target date for UCITS to publish PRIIPs KIDs should be extended by two years, from December 2019 to 2021.
When the PRIIPs regulation was published at the end of 2014, it included a five-year exemption for UCITS; even though they satisfy the definition of PRIIPs, they already publish their own KIIDs and were therefore allowed a transition period.
Since then, despite a year’s delay to the implementation of PRIIPs KIDs, there has been widespread condemnation of their content and the calculations used. UCITS KIIDs, on the other hand, have had a pretty smooth ride in their seven years of existence to date.
In an unprecedented move, the FCA published a Call for Input into companies’ early experience of KIDs in July and the ESAs are now consulting on possible changes to the calculations, narrative and presentation of risks, returns and costs that are planned to take effect from the end of 2019, at which time it was originally expected that UCITS would also fall into line.
A full review of the PRIIPs regulation was due to take place by the end of 2018, but has been postponed, and it is very likely that there will be further changes when the review eventually does take place. The two-year extension will allow for the review and any subsequent changes to be fully evaluated before UCITS need to adopt PRIIPs KIDs.
The extension of the exemption for UCITS raises a question about why PRIIPs should have to publish KIDs when UCITS don’t. As Ian Sayers, Chief Executive of the Association of Investment Companies said after the news, “If KIDs are not good enough for UCITS investors, then they are not good enough for purchasers of investment companies.”
If there are going to be further changes after the review that will override the “interim” changes from the current consultation, that implies that the ESAs still have little idea of what should be displayed on a KID or how best to make the documents worthwhile for retail customers.
On a final note, let’s hope that, long before the end of 2021, a solution is found to the conundrum set out in the ESAs’ consultation – if UCITS currently need to produce KIIDs for retail and professional investors, while PRIIPs KIDs are only needed for retail investors, will UCITS be required to produce a PRIIPs KID for retail investors and a UCITS KIID for professional investors?
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