Honourable Chair and Members of the Parliament,
It is my pleasure to address you today on behalf of the Joint Committee of the European Supervisory Authorities.
I would like to thank the Chair and the Members of the ECON committee for the opportunity to discuss with you the ESAs’ work to review the Delegated Regulation for Key Information Documents for packaged retail and insurance-based investment products.
First of all, I would like to underline that consumer protection is central to the ESAs’ work and we see the rules for the Key Information Document as an important tool to strengthen the regulatory framework for the protection of consumers.
Clear communication is key for consumer confidence. Consumers need information that is engaging and transparent to help them make informed choices. The introduction of the Key Information Document as a standardised short document has increased transparency, in particular on key features and costs of retail investment products.
Since the introduction of the Key Information Document we have prioritised supporting an effective and convergent implementation of these rules, as well as reviewing the rules, where this has been needed. In this respect, we took note when stakeholders raised strong concerns regarding some aspects of the current rules and in particular that there was a risk of providing misleading information to consumers.
As we discussed with this Committee in February 2019, we decided, taking into account the expected timeline for the review of the PRIIPs Level 1 Regulation, that a relatively comprehensive review of the PRIIPs Delegated Regulation was appropriate.
During this process we took various steps to try to ensure that the revised rules would improve the Key Information Document and apply equally well to the different types of PRIIPs. This included broad consultation with stakeholders, through a full public consultation and public hearing, as well as through the use of roundtables with selected stakeholders to discuss specific technical issues. We also supported the Commission’s consumer testing exercise concerning performance scenarios in the Key Information Document - these have been the part of the KID that have raised the most critical issues.
I would like to summarise briefly the main proposals that were included in the ESAs’ draft regulatory technical standards. These were the following:
- New methodologies to calculate appropriate performance scenarios and a revised presentation of these scenarios, with a view to ensuring that retail investors are not provided with inappropriate expectations about the possible returns they may receive;
- The requirement for certain types of investment funds and insurance-based investment products to publish information on the past performance of the product and refer to this within the Key Information Document so that the availability of this information is known, and the information is published in a standardised and comparable format;
- Revisions to the summary cost indicators and changes to the content and presentation of information on the costs of PRIIPs, to allow retail investors to better understand the different types of cost structures, as well as to facilitate the use of this information by persons selling or advising on PRIIPs;
- Modifications to the methodology to calculate transaction costs to address practical challenges that have arisen when applying the existing rules, and address issues regarding the application to certain types of underlying investments;
- Refinements to the rules for PRIIPs offering a range of options for investment (also known as multi-option products), reflecting experience of challenges regarding the clarity and usefulness of the information, in particular to identify the product’s full cost implications.
During the ESAs’ review of the Key Information Document, we also identified a number of areas where we saw the need for changes to the PRIIPs Level 1 Regulation in order to improve the understanding of the document by retail investors.
The receipt of a Call for Advice from the Commission in July regarding the PRIIPs Regulation gives us the opportunity to raise these issues. This broader review over the medium term will be a crucial opportunity to make further improvements to the Key Information Document, including how to appropriately reflect recent developments, such as the increasing use of digital media and the latest insights from behavioural research as to how to best engage consumers.
Overall, we think that the proposals in the Regulatory Techncal Standards provide a sound basis for an amended Delegated Regulation resulting in material improvements to the Key Information Document and meaning that it can work for all products, including UCITS. This will enhance the ability for consumers to compare between investment products and ensure a level-playing field for providers.
Thank you very much.