Unveiling the EU’s Retail Investment Strategy: A Game-Changer for PRIIPs KIDs

Recent Developments: Proposed Changes to PRIIPs Regulation

Following the EU Commission’s publication of its EU Retail Investment Strategy (RIS) on May 24, 2023, draft proposals have been introduced to amend Regulation (EU) No 1286/2014, also known as the Level 1 PRIIPs Regulation. These proposed changes focus on modernizing the key information document and are currently in a feedback period. Once this period ends, the proposals will be reviewed by the European Parliament and the Council of the EU before final agreement.

The Retail Investment Strategy

The primary goal of the RIS is to ‘empower consumers‘ in the investment market. It aims to improve investor protection, ensure fair treatment across all investment products and distribution channels, and facilitate the growth of retail investor participation in capital markets.

The RIS introduces a range of measures designed to streamline and modernize the legislative framework for retail investments. By prioritizing the interests of consumers, this package aims to equip retail investors with the necessary tools to make informed investment decisions that align with their individual needs and preferences. It also strives to create a level playing field, ensuring consistent treatment and protection for all retail investors, regardless of their chosen investment products or distribution channels.

Although many asset managers have recently implemented the revised Delegated PRIIPs Regulations and the exemption for UCITS producing PRIIPs has expired, it appears that the Commission is not giving the industry much room to breathe.

Changes to PRIIPs KIDs

Within the Retail Investment Strategy, there are several proposed changes to enhance the effectiveness and usability of PRIIPs KIDs:

• Increased digitalization and adaptability: recognizing the rise of digital environments, PRIIPs KIDs will be more user-friendly on smartphones and tablets.
  • Electronic format of KIDs: the provision of PRIIPs Regulations information will be mandated in an electronic format. An “Electronic KID” will be available using an interactive tool that allows investors to view personalized key information in the key information document or the information underlying it.
  • Layering of information: specification and conditions surrounding layering have been proposed. Layering will allow users to expand specific sections of interest and provide an interactive, customizable experience for investors.
  • Multi-Option Products (MOPs): new rules will enhance the presentation of key information on MOPs, ensuring better visibility of total costs. The goal is to provide retail investors with a more comprehensive understanding of costs associated with these products through research facilitation and comparison.
  • European Single Access Point (ESAP): once the proposed European Single Access Point has been confirmed, PRIIPs KID content will fall within scope and require PRIIPs information to be provided in a data-extractable format.

• Additional sections: the maximum document length remains at three pages, but two new sections will be added to the PRIIPs KID.
  • “Product at a glance”: a summary dashboard will display essential information regarding costs and risks at the beginning of PRIIPs KIDs, making it easier for retail investors to grasp key elements of an investment product.
  • “How environmentally sustainable is this product?” with growing interest in sustainable investments, a dedicated sustainability section will be added to PRIIPs KIDs, offering clear and comparable information on investment product sustainability-related characteristics.

Prospective timeframe

The official draft of the regulations has been released in all languages of the European Union, initiating an 8-week feedback period that will last until the end of August. Afterward, the regulations will be sent to the European Parliament and Council of the EU for further consideration and potential amendments.

Assuming changes are not extensive, updated regulations would become effective in early 2025, and regulatory technical standards will be submitted by the European Supervisory Authorities approximately twelve months later. The implementation period, therefore, leaves manufacturers with a tiny window of opportunity.

Conclusion

While the proposed changes aim to increase retail investors’ protection, the road ahead for asset managers will not be easy. There will be extensive changes from both regulatory and compliance perspectives, and serious consideration will be required for processes and system development. Although the amendments bring improvements, there are plenty of challenges ahead of manufacturing firms and other asset managers preparing to comply.

How can Zeidler Group support?

By leveraging advanced in-house digital solutions, Zeidler Group champions fresh ways of working efficiently with clients and redefines legal value. With the introduction of the “electronic KID”, Zeidler Group will look to leverage current systems and solutions to ensure alignment across our clients’ regulatory reporting outputs — maintaining synchronicity will be key here.

The pending changes are another indication as to how technology continues to reshape the investment world and with this, Zeidler Group remain committed to delivering innovative solutions to asset managers to help you navigate this ever-changing landscape.