Page 31 - BIPAR Annual Report 2020_EN

EU Regulation on

KID for PRIIPs

is particularly challenging until there is further clarity of the trading landscape post-Brexit. Subject matter and scope Background

ESMA started working on the review reports under MiFID II, amongst others with a call for evidence on the disclosure of The Regulation applies to packaged retail and insurance-based investment
inducements, costs and charges published in July 2019, to which BIPAR responded. Early April 2020, ESMA published its products, which are, broadly speaking, products where the amount repayable, The PRIIPs EU Regulation introduces
report containing technical advice to the Commission. In the advice, ESMA does not call for a complete ban on induce- or the maturity or surrender value, is subject to fluctuations. It does not apply a standardised, easy to understand,
ments under MiFID II. It does call on the Commission to assess the impact the MiFID II inducements regime has had on to non-life insurance or to life insurance contracts where the benefits under precontractual “Key Information
the distribution of retail investment products across the Union, the effects a ban on inducements would have on the the contract are payable only on death or incapacity due to injury, sickness
different distribution models existing in the Union and what actions that could be taken to mitigate the risk of undesired or infirmity. It does not apply to “simple” deposits, certain securities and Document (KID)” for PRIIPs, which
consequences of an inducements ban. pensions (for pensions, the Commission should assess the situation in its should facilitate comparison between
review). different products. The Regulation has
ESMA added that to assess the potential positive or negative effects of a ban, “the impact of the bans as introduced in
the Netherlands and the United Kingdom should be examined” and that such impact assessment be carried out and any The Regulation only aims at the protection of retail investors (i.e. “client” as applied since January 2018, is binding
following actions be taken in relation to all retail investment products, not just MiFID financial instruments. ESMA also defined in MiFID II or “customer” as defined in IMD I where that customer in its entirety and directly applicable in
suggests considering additional actions to also tackle investor protection issues arising in “closed-distribution models”. would not qualify as a professional client as defined in MiFID II). all Member States.

Regarding the MiFID II costs and charges disclosure regime, ESMA also stated that investment products with the same Key issues for intermediaries/financial advisers
characteristics should be treated the same.
BIPAR agreed, from the outset, that for all products which include an investment risk, specific, proportional and relevant
The Commission launched its public consultation on the review of MiFID II in February 2020. The consultation asks pre-contractual information should be available. BIPAR requested clear confirmation about who is responsible for the
amongst others if there should be an outright ban on inducements and looks at the existing rules such as on Product KID. Throughout the legislative process BIPAR opposed any additions to the KID regarding information on the person
Oversight and Governance. Taking into account the Covid-19 crisis, BIPAR asked for an extension of the deadline to selling the product, which is already adequately addressed in specific instruments, such as MiFID and IDD. Since the
respond, which was accepted. BIPAR stated it believes the current MiFID II framework lacks proportionality for small application, BIPAR discussed with its members the availability and use of KIDs in practice, for example, on risk rating and
financial intermediaries or advisers. Certain targeted improvements to the MiFID II regulatory framework would be wel- the risk scales used, on the costs/pricing scenario for the basis of the KID, on performance scenarios and on the specific
come, but always after profound stakeholder discussion and considering the Covid-19 related situation. BIPAR recalled case of UCITs (Undertakings for the Collective Investment in Transferable Securities - see below).
that the current system offers transparent choice for investors between different advice models in a strictly regulated
and supervised system.

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