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Application date
PRIIPs are used in the context of advising clients when investing so as for them to be able to understand and compare such packaged products. Therefore, PRIIPs are correlated with MiFID II. The Luxembourg Bankers’ Association (ABBL) believes that PRIIPs’ KID application should be aligned with MiFID II application and should be postponed.
Due to the delays in the application of MiFID, and to the delays of ESAs in developing level 2 and 3 measures, they believe it will not leave enough time for the financial sector to develop, adapt and compute the KID (i.e. computing the MRM, the SRM, the SRI, etc.). ABBL notes the experience from Luxembourg where for UCITS KIDs there were more than 300.000 documents to be produced. In perspective, considering the KID for all managed products in each Member State (MS) the impact is likely to be a true operational challenge if every rule was ready now.
Information on costs
ABBL also believes that the draft RTS are going far beyond KIDs set of objectives. The KID should first serve as a tool for retail investors to compare products and to understand the key features of such investments. Therefore, the KID should not be altered by the inclusion of confusing information. As such, lots of factors related to costs should not be included, as ABBL believes these factors are marginal and not material. In reality, such factors are not sufficient to discriminate products. Therefore, including such factors will lead to a situation where a product might not be selected due to the inclusion of some factors that are in fact not so relevant for the choice of a product. This is especially the case of many costs factors.
Handing over the KID
While it is certain that the KID should be provided to investors, ABBL believes that the means to provide such KID are not appropriately described. The draft RTS could benefit from more clarity on the way KIDs can be delivered to clients so as to solve several practical issues the industry has been confronted with in the past. Therefore, when there is no physical meeting between distributors and investors, the draft RTS should clearly allow for online access to the KID. Furthermore, in a digital environment, having a prior access to online KIDs is a prerequisite for most investors before taking a decision, independently of the advice they may receive on top.
Scope
The ABBL would like to underline the remaining issue relative to the scope of the PRIIPs KID. It seems that derivatives as defined in MiFID II are included in the scope. According to the PRIIPs Regulation a PRIIP is an investment product where the investment is made with the purpose of obtaining a return based on a risk taken. ABBL therefore wonders if derivatives are included in the scope or if derivatives are included only if the objective of the derivative correspond to the PRIIPs definition (i.e. to follow an underlying purpose of obtaining a return based on a risk taken). If as stated in Annex II, part 1, 9(c), all derivatives are included in the scope, ABBL fears it can be really misleading. Indeed, in that case, as by design derivatives are often of a bilateral nature, the underlying purpose of derivatives is not adequately taken into consideration.