A flawed review process not tackling the heart of the issue
EFAMA has always made it clear that a revision of the PRIIPs Regulatory Technical Standard (RTS) falls short of conducting a proper Level 1 review. A review that is explicitly required by the Level 1 Regulation and is overdue for more than one year.
Indeed, this outstanding review is essential to, once and for all, settle the dilemma at the heart of the PRIIP KID: How can you create a fully homogenised retail investor document involving hugely diverging investment and insurance products while, at the same time, keeping the information both meaningful and not misleading? In our opinion, both goals can not be fully achieved simultaneously and some trade-off will have to be found between meaningful and comparable information. This conundrum cannot be solved only by making technical changes at RTS level – despite the ESAs’ ongoing best efforts. We, therefore, understand and support industry associations and consumer representatives voicing their frustration that this issue is not tackled head-on through a Level 1 review.
Despite all these concerns, it looks likely that the Commission will push for the adoption of RTS changes ahead of a wider distribution review which is still several years away. If the Commission cannot be swayed, the only alternative is to fix some of the current KID’s biggest flaws before fund investors are confronted with the PRIIP KID instead of the current and well-functioning UCITS Key Investor Information Document (KIID). The ESAs’ revised RTS are, therefore, a small step in the right direction and are, within the impossible confines imposed by the Level 1 Regulation and the Commission’s mandate, as good as they can get. For now!