In a welcome move, the European Commission (the "Commission") has agreed an extension to the date of application of the EU Regulation on Packaged Retail and Insurance-Based Investment Products (PRIIPs) (EU 1286/2014) (the "Regulation"). The deferral, announced on 9 November 2016, follows the European Parliament's (the "Parliament") rejection of the draft regulatory technical standards (RTS) adopted by the Commission in June 2016 in respect of the form, content and methodology of the Key Investor Document (KID) required under the Regulation.
Concerns had been raised regarding what were viewed as some controversial aspects to the contents of the KID, (not least the requirement for future performance scenarios to be included, whilst excluding past performance metrics (a UCITS KIID, by contrast, requires disclosure of past performance only)), and in its rejection the Parliament had called on the Commission to submit new draft RTS addressing these concerns and to consider the postponement of the implementation date.
The request to extend the implementation date centred around concerns regarding the possibility that the PRIIPs Regulation might enter into force on 31 December 2016 without the benefit of related RTS. The agreement to extend the application date by one year to 1 January 2018 allows the concerns regarding the KID to be remedied and avoids the uncertainty that would likely have ensued had the Regulation applied without the corresponding RTS being in place. It also provides producers and distributors of PRIIPs with additional time to prepare for KID compliance. Alternative investment funds marketing to retail investors now have until 31 December 2017 to comply with the Regulation. UCITS are currently exempted from preparing a KID under the Regulation until 31 December 2019.
In accordance with the ordinary legislative procedure, the amendment to the implementation date of the PRIIPs Regulation must be introduced by the Commission by way of a new regulation. This is likely to prove a formality given that the legislature is supportive of the proposed delay.
In the meantime, the Commission has signalled that it is working closely with the European Supervisory Authorities (ESMA, EIOPA and EBA), which are required to submit the revised RTS to the Commission within six weeks. The revised RTS will then require Parliament and Council approval. With the Regulation now applying from 1 January 2018, the Commission expects the revised PRIIPs framework to be in place during the first half of 2017.