Last week the European Parliament voted on the proposal for the modernisation of the key information document. This means significant changes in the PRIIPs KIDs regulation are on their way.
The main target of the regulators is to strengthen the comparability between different products for retail investors as well as easier accessibility to the PRIIPs KIDs.
The most important changes that will apply to the current regulation are as follows:
New ESG Section
The PRIIPs KID will contain a new section “How environmentally sustainable is this product?”, that shall include:
- The minimum proportion of the investment of the PRIIP that is associated with economic activities that qualify as environmentally sustainable in accordance with Articles 5 and 6 SFDR.
- The greenhouse gas emissions intensity associated with the PRIIP.
- For Article 8 and Article 9 products SFDR, whether, in relation to the PRIIP, the PRIIP manufacturer has considered the principal adverse impacts of the investment decision on sustainability factors.
Page limitation
As additional information will be required in the PRIIPs KIDs, the page limitation will be extended to 4 pages.
Performance Scenarios and Past Performance
In the majority of cases, the KID should include forward-looking performance scenarios. However, in a limited number of cases, when such scenarios could be misleading, past performance should be included in the KID for relevant PRIIPs.
Digitalisation
The digitalisation of the PRIIPs KIDs shall facilitate the information access to retail clients. This shall support retail investors to make sound investment decisions. Therefore, providing the PRIIPs KIDs in an electronic format shall be the standard, while retail investors can still request a paper copy on demand. A dynamic online tool will also be considered as an electronic format. As dynamic websites and tools are already available from many asset managers, we expect this to be the standard publishing method in the future. The ESAs will work on the relevant RTS for the digitalisation of PRIIPs KIDs. We think that this will be a game changer in the digitalisation of fund information throughout the whole industry. The online tool shall at least provide the following:
- The interactive tool, or its use, shall not alter the understanding of the key information document. All key information shall be presented.
- The key information document shall be easily accessible through a link next to the interactive tool, and the link shall be accompanied by the following message “It is recommended to download and store the key information document”.
- The interactive tool shall allow investors to simulate costs over the recommended holding period.
- Where the PRIIP manufacturer offers the retail investor a range of options for investments:
- The information provided shall reflect the combination of investment options that the retail investor is considering.
- The pre-contractual information documentation relating to the underlying investment assets backing the investment options shall be easily accessible through a link next to the interactive tool.
Stand-alone document
The PRIIPs KID is considered a stand-alone document and shouldn’t come along with any marketing additions.
Independent online comparison tool
The regulator is planning to provide an independent online comparison tool that will allow easy analysis of different PRIIPs. The source for this online tool shall be the long-discussed European Single Access Point which shall be the centralized database for all investment data in the EU. Going forward, the PRIIPs KIDs shall contain a link to the online comparison tool. Management companies, investment firms and insurance intermediaries shall promote the use of the online comparison tool on their websites, including in relevant marketing material.
Marketing
A PRIIP distributor must provide the PRIIPs KID to retail investors at an appropriate time before the investor enters into a contract. In addition to that, the PRIIPs KID must be available at least at the same time when any marketing communication about the product is addressed to a retail investor. This will have a significant impact on future fund marketing.
For more details please see https://www.europarl.europa.eu/doceo/document/A-9-2024-0160_EN.pdf. Let us know in case you have any questions on PRIIPs KIDs or need any help with your current solution.
Source: European Parliament
