Asset managers, insurance companies and financial institutions will soon need to comply with the EU’s new Packaged Retail and Insurance-based Investment Products (PRIIPs) Key Investor Documents (KID) reporting requirements.
The regulation covers packaged investment products marketed to retail investors, which are subject to investment risks. Investment funds, life assurance-based investment products, structured term deposits and derivatives all fall under its scope.
The first challenge is finding all the relevant data. CSS stated that ten years of historical NAV data – either actual fund history or representative proxy/index data – will be needed to meet compliance. For products that have a five-year recommended holding period, even more history is needed.
The second challenge highlighted is the lack of resources. It stated that compliance, legal and operations teams are spread thin trying to meet deadlines of other impending regulations, such as the EU Taxonomy and Sustainable Finance Disclosure Regulation (SFDR).
Separate UK KIIDs/KIDs
Following Brexit, the UK has created its own direction for PRIIPs requirements. This means firms will need to produce two stand-alone documents for UCITS products, an English UCTIS-like KIID for UK investors and a PRIIPS KID for EU investors, CSS stated.
Making it even harder is the fact the UK has a different methodology for calculating transaction costs and does not require performance scenarios.
EPT template and data connectivity
Another challenge is that some organsiations will need to create different versions of the European PRIIPs Template (EPT). The EU EPT will now need to align to the PRIIPs KID data and figures should only be updated with the PRIIPs KID is updated.
Different regulation interpretations
The final challenge is the different interpretations of the regulatory language of for the KID. CSS highlighted five different regulatory differences based on regions. These include European PRIIPs Templates, FCA calculation of summary cost indicator, FCA transaction cost floor and more.
To help meet compliance, CSS recommends looking for a PRIIPs solution that can cope.
Read the full report, and checklist, here.
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