Considerations on COM(2021)397 - Amendment of Regulation (EU) No 1286/2014 as regards the extension of the transitional arrangement for management companies, investment companies and persons advising on, or selling, units of undertakings for collective investment in transferable securities (UCITS) and non-UCITS

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dossier COM(2021)397 - Amendment of Regulation (EU) No 1286/2014 as regards the extension of the transitional arrangement for management companies, ...
document COM(2021)397 EN
date December 15, 2021
 
table>(1)Article 5 of Regulation (EU) No 1286/2014 of the European Parliament and of the Council (3) requires manufacturers of packaged retail and insurance-based investment products (PRIIPs), before making a PRIIP available to retail investors, to draw up and publish a key information document (‘KID’).
(2)Article 32(1) of Regulation (EU) No 1286/2014 exempts management companies as defined in Article 2(1), point (b), of Directive 2009/65/EC of the European Parliament and of the Council (4), investment companies as referred to in Article 27 of that Directive and persons advising on, or selling, units of undertakings for collective investment in transferable securities (UCITS) as referred to in Article 1(2) of that Directive from the obligations laid down in that Regulation, and thus from the requirement to produce a KID, until 31 December 2021 (‘the transitional arrangement’). In accordance with Article 32(2) of Regulation (EU) No 1286/2014, where a Member State applies rules on the format and content of the key investor information document, as laid down in Articles 78 to 81 of Directive 2009/65/EC, to non-UCITS funds offered to retail investors, the transitional arrangement is to apply to management companies, investment companies and persons advising on, or selling, units of such non-UCITS funds to retail investors.

(3)Commission Delegated Regulation (EU) 2017/653 (5) supplements Regulation (EU) No 1286/2014 by laying down regulatory technical standards with regard to the presentation, content and standard format of the KID, the methodology for the presentation of risk and reward and for the calculation of costs, the conditions and minimum frequency for reviewing the information contained in the KID, and the conditions for providing the KID to retail investors.

(4)On 7 September 2021, the Commission adopted a Delegated Regulation amending the regulatory technical standards laid down in Delegated Regulation (EU) 2017/653 as regards the underpinning methodology and presentation of performance scenarios, the presentation of costs and the methodology for the calculation of summary cost indicators, the presentation and content of information on past performance and the presentation of costs by PRIIPs offering a range of options for investment and alignment of the transitional arrangement for PRIIP manufacturers offering units of funds referred to in Article 32 of Regulation (EU) No 1286/2014 as underlying investment options with the prolonged transitional arrangement laid down in that Article. The date of application of that Delegated Regulation is 1 July 2022, but it is important to reflect the need to give management companies, investment companies and persons advising on, or selling, units of UCITS and non-UCITS sufficient time to prepare for the end of the transitional arrangement and thus for the obligation to draw up a KID.

(5)In order to ensure that the need for sufficient time to prepare for the obligation to produce a KID is met, it is necessary to extend the transitional arrangement until 31 December 2022.

(6)Regulation (EU) No 1286/2014 should therefore be amended accordingly.

(7)Regulation (EU) No 1286/2014 aims to enable retail investors to make better-informed investment decisions. In spite of the good intentions underpinning Regulation (EU) No 1286/2014, a number of concerns have been expressed since its adoption, including as regards the need for a clearer definition of ‘retail investor’, the product scope of that Regulation, the elimination of paper as the default option where a PRIIP is offered on a face-to-face basis, the concept of ‘successive transactions’, and the provision of pre-contractual information to professional investors. Those concerns need to be urgently addressed in order to improve retail investors’ trust in financial markets, both for the benefit of companies looking for funding and for the long-term benefit of investors. The need for a broader review was already set out in Regulation (EU) No 1286/2014, and its urgency remains unchanged. On the basis of such a review in accordance with Regulation (EU) No 1286/2014, the Commission is expected to submit, as a matter of urgency, a report to the European Parliament and to the Council accompanied, if appropriate, by a proposal to address the existing limitations.

(8)Given the very short period left until the original end of the transitional arrangement, this Regulation should enter into force without delay,