PRIIPs – Commission publishes proposed changes to the KID rules

The European Commission has today published a number of targeted proposals to amend the Level 1 PRIIPs Regulation.

In particular, the changes would affect the contents of the Key Information Document (KID) which must be provided to retail investors before they invest and include. The proposed changes include:

• new sections in the KID with dashboards
  • to provide investors with key ESG information on the sustainability aspects of products subject to the SFDR (including the minimum proportion of the PRIIP’s investment associated with environmentally sustainable economic activities under the Taxonomy Regulation)
  • summarising information about the total costs of the PRIIP and the summary risk indicator
• a simplification of the rules on providing a KID by mandating electronic disclosure (unless the client has requested to receive a paper version)
• specifying how layering can be used in the digital provision of a KID
• specifying the disclosure of costs information with respect to Multi-Option Insurance Products (MOPs) to promote choice between different products
• the removal of the comprehension alert (‘You are about to purchase a product that is not simple and may be difficult to understand’) at the start of the KID
• confirming that some corporate bonds with make-whole causes are out of scope of the PRIIPs Regulation.

The proposals were published in conjunction with other documents forming part of the Commission’s Retail Investment Strategy. These put forward amendments to product governance of PRIIPs, seemingly through changes to MiFID – we deal with these proposals here and they are therefore not covered in this note.

What happens next?

The next step is for the Commission’s proposal to be reviewed by the Council of the EU and the European Parliament and for an agreed text to be finalised between the three institutions.

When will any new rules come into effect?

The agreed text would subsequently be published in the Official Journal and would come into effect at a specified date.

The Commission’s draft suggests a period of 18 months between publication and application of the changed rules, though this needs to be agreed with the Council and the European Parliament.

What’s the context of the Commission’s proposals?

In July 2021, as part of the overall review of the PRIIPs Regulation, the Commission called on the three European Supervisory Authorities (ESAs) to provide technical advice on a number of areas, including

• a survey on the use of the PRIIPs KID
• a survey on the operation of the comprehension alert and
• an assessment of how far the PRIIPs regulation is adapted to digital media.

The ESAs duly consulted on proposals in October 2021 (see our summary here).

However, the work that the ESAs had done since the PRIIPs regime came into force in 2018 led them to believe that changes to the PRIIPs Regulation were needed in areas beyond those which the Commission had asked for advice on.

As a result, their call for evidence sought feedback on issues that went beyond the ESAs’ formal mandate from the Commission.

In April 2022, the ESAs submitted their advice to the Commission (see our summary here). Among other things, this suggested that

• a significant number of changes should be made to the PRIIPs Regulation
• the European Parliament and Council of the EU should consider a broad review of the PRIIPs framework
• appropriate consumer testing should be undertaken before any proposals for change are made
• there should be an aim to improve the presentation of information provided to consumers and to make it easier for them to compare different products.

The ESAs’ advice also contained a number of recommendations, some of which have now been adopted as part of the Commission’s proposals.