There are just four months left until investment firms need to meet the rules for the EU’s new Packaged Retail and Insurance-based Investment Products (PRIIPs) reporting requirements.
By January 1, 2023, firms will need to adjust to new formats, content and calculations for preparing their Key Information Documents (KIDs).
While some of the PRIIPs 2.0 requirements are already in motion, Compliance Solutions Strategies (CSS) warns of one of the biggest impacts. This is the extension to include all domiciled Undertakings for Collective Investment in Transferrable Securities (UCITS) funds to be PRIIPs-compliant by the same date.
With all the other regulatory updates firms need to complete, CSS has offered guidance to PRIIPs 2.0.
It started by highlighting the key changes. A major one is that PRIIPs KIDs will be published for UCITS products for the first time, with new Regulatory Technical Standards (RTS) in place for existing KIDs.
Other notable differences are an expansion of data requirements, more detail around appropriateness of benchmarks, new calculations for performance scenarios, changes to cost disclosure, insurance wrappers requiring the new EPT data, European PRIIPs Template (EPT) changes and UK divergence on UCITS/PRIIPs.
CSS added that the update will expand data requirements, including those for net asset value, dividends, proxy, index, trial balance and trade data. It added that with PRIIPs, historical data will cover ten years to start. Funds that have been in existence for less than ten years will need to find proxies and benchmarks to do their calculations.
Moving on to EPT changes, CSS stated that there will be new fields to align to the new PRIIPs RTS which comes into force on January 1. These will need to be in circulation from October/November 2022 to allow insurance firms to meet their January 1 PRIIPs obligations.
It added, “One key consideration is the fact that the EPT data should now align with the PRIIPs KID at all times. This differs from the previous approach whereby a fresh set of monthly or quarterly recalculations were pushed out to the insurance firms. Going forward, EPT data will be aligned to the PRIIPs KID and only updated when the PRIIPs KID is updated.”
The company highlighted several discussions around performance displays. The new PRIIPs RTS requires monthly past performance and performance scenario results should start to populate on the product manufacturers’ websites from January 1 and will need to continue for as long as history is available.
One current discussion revolves around what date periods should be shown, how to display them and for how long. A standard is taking form around annual performance results and index returns showing ten years on websites. Then, monthly performance scenario results are available for as long as the calculation exists.
CSS concluded, “With PRIIPs KIDs regulation deadlines fast approaching, it is more important now than ever that asset managers ensure they are ready to meet the compliance requirements. Your firm should be on track to onboard your providers in September, complete onboarding by November, and be fully tested and ready to go by early December.
“If not, then the first step is to figure out what’s stopping you from moving forward. Maybe you’re confused by the different PRIIPs interpretations. Or you haven’t had the time to assess your current reporting capabilities. Or you’re not sure your teams can handle the additional data and workload with everything else on their plates.”
Read the report here.
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