The European Commission recently introduced an omnibus directive as part of its retail investment strategy, which includes targeted changes to modernise Priips Kids. Mikkel Bates, regulations manager at FE fundinfo, said the new rules will affect Priips Kids in two significant ways.
Firstly, the comprehension alert and any references to environmental or social objectives pursued by the product will be removed from the existing version of the document. Secondly, a new dashboard summarising the contents of the Kid and an additional section on the product’s sustainability credentials will be added. Consolidating this information within three pages is expected to be challenging for many companies, according to Bates.
Over time we will find out just how consumer-friendly this document is and how many people look at it.
The delivery method for the Priips Kid has also undergone changes, with electronic delivery becoming the default option. This means that companies must, at the very least, make the Priips Kid available online in PDF format. While providing an interactive Priips Kid with layered information is not mandatory, Bates welcomed the “digital-first” approach. “Those who want to see a little bit of information can access the document and read the basics, with the option to drill down further into the costs if they want more details.”
However, Bates noted that layering information adds further complexity as firms will need to archive all versions of the document and establish an audit trail. “If a customer comes back in five years’ time and wants to challenge the contents of a Priips Kid, you’ll need to be able to retrieve that online document. The question is, will you be able to retrieve the personalised version immediately?”
Despite the EU’s attempts to simplify the Priips Kid, Bates doubts that the new measures proposed will enhance overall transparency for retail investors. He cited data from the UK regulator, the Financial Conduct Authority, indicating that fewer than 3% of consumers in the UK read pre-contractual documents. “Over time we will find out just how consumer-friendly this document is and how many people look at it.”
The omnibus directive will be submitted to the European Parliament and European Council eight weeks after becoming available in all EU languages. The changes are expected to be implemented in early-to-mid 2025 at the earliest, according to Bates.
, head of asset management product strategy and managing director, Luxembourg, at FE fundinfo, expressed concern about the industry’s ability to implement all the changes within the anticipated timeframe. “Beyond the complexity of producing the documents, a challenge the industry regularly faces is the need to modify documents before the set deadline. All documents need to be produced and transmitted to the regulator before they can be made public.”
Aerts emphasised the importance of staying up to date with the latest requirements, ensuring timely production of information and data, and maintaining consistency across different channels. “The underlying data plays a vital role. So, making sure that there is a level of quality and consistency is crucial.”
Last year, from the Luxembourg Stock Exchange. As part of the deal, the stock exchange received a stake in FE fundinfo. Aerts said FE fundinfo’s acquisition of Fundsquare would create a regulatory reporting centre of excellence in Luxembourg. He said the move also enables Fundsquare to benefit from FE fundinfo’s product range and expertise. “We are not changing what we do. We are improving and offering more services to our clients.”
This article was published for the Delano Finance newsletter, the weekly source for financial news in Luxembourg. .