Thematic evaluation of key information documents required by PRIIPs regulation
The Financial Supervisory Authority (FIN-FSA) has made a thematic evaluation of key information documents (KIDs) required by PRIIPs regulation. The requirement to publish a KID when offering packaged retail and insurance-based investment products (PRIIPs) to retail investors came into effect from the beginning of 2018. Generally, there have been challenges to some extent in the application of PRIIPs regulation. The FIN-FSA has noted these challenges and in its thematic evaluation has focused more on the accessibility of KIDs from the perspective of retail investors.
Based on the FIN-FSA’s sample, the thematic evaluation shows that the objective of PRIIPs regulation for a key information document that gives the information required to make an informed investment decision and facilitates the comparison of products belonging to different product groups is, in practice, challenging. In terms of product comparability, the clearest benefit brought, in practice, by PRIIPs regulation would appear to be the fact that there is one consistent structure by which information is presented in all product groups.
On the basis of the FIN-FSA’s observations, in structured products, for example, a balance must be struck between, on the one hand, what the key information is and, on the other hand, what information is necessary to make an investment decision. In structured products, the presentation of descriptions relating to the liquidity of products and to premature sale appears to be challenging and, in these, product manufacturers have room for improvement.
In investment-linked insurance policies, opportunities for comparing products on the basis of KIDs for the insurance wrapper without selecting the actual investment assets and acquainting oneself with information about the assets appears to be quite limited. This is due to the fact that these KIDs for the insurance wrapper generally appear to provide very little concrete and useful information on, for example, the product’s risks, costs or performance outlook.
The FIN-FSA draws product manufacturers’ attention to the quality of KIDs. It is the responsibility of product manufacturers to ensure that documents are high quality, so that investors read them and are able to use them to make investment decisions. Closer attention should be paid to quality assurance, particularly when using automation or machine generation in preparing KIDs, translating them or producing information contained in them.
KIDs must always be published on the manufacturer’s public website and they must be easy to find. KIDs must also be submitted to the FIN-FSA by email to the address PRIIPS-KID(at)fiva.fi. The FIN-FSA published a supervision release on the matter on 27 November 2017.
In addition, manufacturers of PRIIPs should note that the Joint Committee of European Supervisory Authorities (ESA) has given interpretations on the application of PRIIPs regulation. These Q&A interpretations contain more detailed guidance on how the PRIIP Regulation should be applied.
For further information, please contact
Tero Oikarinen, Market Supervisor, tel. +358 9 183 5241.
1 Supervision release 27 November 2017 – 63/2017 Submission to Financial Supervisory Authority of Key Information Documents required by PRIIPs regulation – regulation enters into force on 1 January 2018
2 Q&A on the PRIIPs Key Information Document (KID), updated 19 July 2018 (https://esas-joint-committee.europa.eu/Publications/Technical Standards/Questions and Answers on th PRIIPs KID.pdf)