On 21st December 2022 the European Supervisory Authorities (ESAs) published again an update on the PRIIPs Q&A. This shows that the industry still has many open questions on the latest RTS as the previous update was only released on 14th November.
While the most important previous updates were related to the narratives, the latest update clarifies details on the calculation of the performance scenarios and especially the cost calculations.
As an example, the new Q&A gives an answer to the question about the number of trading periods that shall be used for the calculation of the performance scenarios as the RTS do not include a clear specification. As conventions may vary between EU member states or markets, the ESAs advise using the actual number of prices observed in the prescribed interval.
Another important clarification is related to the Reduction in Yield calculation. While in the RTS it is clearly stated that for the calculation of the 1-year Reduction in Yield figures a 0% return shall be assumed, there are no further details for the calculations at the end of the relevant recommended holding period. In particular, it wasn’t clear what happens if the moderate scenario shows a total loss of capital or even negative returns which would lead to zero or very low costs in the Reduction in Yield figures. Those results might be misleading for investors. Therefore, the ESAs recommend that a net performance of 0% shall also be applied in those cases.
Although most of the updated Q&A are relevant for PRIPs other than investment funds, it is very important to analyze the changes in detail and apply them to the relevant PRIIPs solutions.
The updated Q&A can be found under the following link:
https://www.esma.europa.eu/sites/default/files/library/jc_2017_49_jc_priips_qa.pdf
If you have any questions on the Q&As or need any help with your PRIIPs solution, feel free to contact our team at any time!
