PRIIPs - the UK’s post-Brexit regime starts to take shape

As flagged in its Written Ministerial Statement of 23 June 2020, HM Treasury has now published a policy statement, “Amendments to the Packaged Retail Investment and Insurance-based Products Regulation: July update”.

Although brief (at only four pages of text), the statement shows how HM Government intends to use its post-Brexit ‘freedom’ to make changes to the EU’s PRIIPs regime after the transition period ends on 31 December 2020. It sets out three amendments which will be of interest to UK UCITS ManCos and others interested in what the UK’s on-shored PRIIPs regime will look like.

The amendments (which will be brought forward ‘when parliamentary time allows’) would

• enable the FCA to clarify the scope of the PRIIPs Regulation through its rules

  although the definition of a PRIIP would not change, this move would address ambiguities (present and future) in relation to whether certain types of investment product – such as corporate bonds – were in scope

• replace ‘performance scenario’ with ‘appropriate information on performance’ in the PRIIPs Regulation

  The PRIIPs Regulation requires PRIIPs manufacturers to include performance scenarios in the KID, with the methodology for calculating these scenarios being set out in the PRIIPs Level 2 RTS.

  This, though, has attracted a great deal of criticism from the asset management industry and others – for more detail, see Q.5 in our FAQs on the PRIIPs KID.

  HM Treasury is proposing to replace the term ‘performance scenario’ in the PRIIPs Regulation with ‘appropriate information on performance’. The FCA could then amend the RTS and clarify what information on performance should be provided in the KID – with enough flexibility to allow past performance if felt desirable.

• empower HM Treasury to extend the current UCITS exemption by up to five years

  As things stand, UCITS must produce a KIID under the UCITS Directive but are exempted from having to provide a PRIIPs KID as well. This ‘UCITS exemption’ is set to run out on 31 December 2021,

  Since HM Government “currently considers that the existing rules for UCITS disclosure are satisfactory” and is proposing to undertake a review of the UK framework for investment product disclosure, it is proposing to delegate power to HM Treasury to extend the UCITS exemption for "up to a maximum of five years" (to 31 December 2026).

  This gives HM Treasury time to consider how (and when) best to bring about the transition to whatever domestic successor to a UCITS results from the review referred to above.