Since the rejection of the regulatory technical standards (RTS) by the European Parliament on 14th September, it is felt that the launch of PRIIPs KIDs could head in one of the three possible directions...
Option 1 – Go live in December 2016 with only Level 1 requirements in place
Just a few weeks ago, this option looked like a non-starter. How could the industry deliver “identikit” KIDs for all in-scope products without the details? However, this possibility is now being seriously considered. Should this option go ahead, we would strongly advise PRIIP manufacturers to proceed on the basis of the rejected RTS, as the majority of details in them will be adopted as is.
Questions have been raised about whether companies would be able to defend themselves against any client complaints further down the line. Until the published RTS are revised, it will be upheld and will ensure all KIDs look and feel the same.
Option 2 – Go live in December 2016 with hastily revised RTS
This is possibly the worst of all options, as it will leave very little time to implement the changes. The real danger is that the ‘fudged’ changes will need to be applied fully in a matter of weeks with little consideration for the work involved. This is not just about cancelling Christmas for much of the industry, but about the difficulty of setting up new data feeds from a number of sources in such a short time and delivering compliant KIDs that are “accurate” as well as “clear, fair and not misleading”.
Added to that, companies have mostly made good progress towards delivering KIDs to the current specification, so the message that the regulators will be sending will be that being efficient and planning ahead doesn’t really pay off.
Option 3(a) – Delay for 3 months (to 31 March 2017)
If the European Commission and Parliament agree to a delay, such a short one does little to ensure the agreed RTS are fit for purpose, providers can deliver what is required and correct KIDs are available to retail customers.
Some of the intense lobbying now going on could, at a stretch, be considered part of the consultation process, but to stick with the correct process, any revision to the RTS should involve a formal consultation with interested parties. This implies, publishing a new RTS, consulting and adopting them. Even without any further changes, achieving all this by next March is near impossible.
Option 3(b) – Delay for 12 months (to 31 December 2017)
This might be the favoured approach for many, but it may not be as appealing as it first seems. An extra year will certainly give everyone time to make sure KIDs are as good as they can be (whether they achieve their original, laudable goals is another matter). However, most companies will already have allocated their resources for next year to the delayed arrival of MiFID II at the same time. To avoid capacity issues, companies will need to get either their PRIIPs or MiFID projects finished well before the end of the year so they can get on with the other one.
Option 3(c) – Delay for 6 months (to 30 June 2017)
If the European Parliament does decide to vote for a delay to PRIIPs Level one – and they will have to do so soon– then six months probably gives us the “Goldilocks” scenario: not too short as to make no difference and not too long that it gets caught up with MiFID II.
In whichever direction the regulatory process moves, the inevitable outcome is that PRIIPs KIDs will need to be complied with. FE is currently working with a number of forward thinking asset managers to ensure that they are best placed to meet any requirements. While the process awaits clarity, this is not the time to down our tools as there is still a lot of work to be done before PRIIPS KIDs can finally go live.