On November 11, 2015, a Joint Consultation Paper2 in relation to PRIIPs Key Information Documents was published by the European Banking Authority (“EBA”), the European Securities and Markets Authority (“ESMA”) and the European Insurance and Occupational Pensions Authority (“EIOPA”, and together, the “ESAs”). The paper sets out draft regulatory technical standards (“RTS”) with regard to presentation, review and provision of the Key Information Document (“KID”) required to be provided in respect of packaged retail investment and insurance-based products (“PRIIPs”) pursuant to the EU Regulation in relation to PRIIPS (the “PRIIPS Regulation)3, which came into force on 29 December 2014. The Consultation Paper includes proposals in relation to the methodologies underpinning the presentation of the risk reward profile and costs information required to be contained in the KID. The obligation on product manufacturers to prepare a KID will commence from the beginning of 2017.

The Consultation follows a joint discussion paper published by the ESAs in relation to the presentation and content of the KID published in November 2014 and a technical discussion paper on the same issues published by the ESAs on 23 June 20154.

Proposals in Relation to the Presentation and Content of the KID

The draft RTS provides a mandatory template to be used for each KID (including mandatory text). Certain permitted adaptations to the template are also provided. Amongst the major issues dealt with in relation to presentation and content are:

Risk indicators:

The draft RTS requires a summary risk indicator ranking the PRIIP on a numerical scale from 1 (lowest risk class) to 7 (highest risk class). The draft RTS contain a methodology for the assignment to each PRIIP of the relevant risk class, the inclusion of narrative explanations and, for certain PRIIPs, additional warnings.

The criteria for establishing the relevant risk class is set out in Annex II to the draft RTS. The criteria primarily comprise credit risk and market risk. In addition, for products that can be traded over the life of the product but for which no regulated liquid market exists, a warning shall be included under the risk indicator that selling the PRIIP before the recommended holding period may not be possible and may give rise to significant costs or losses. Where a product is denominated in a currency other than the legal tender in the member state in which it is being marketed, a narrative must be included stating that the return the investor gets may be higher or lower as a result of currency fluctuations.

Performance scenarios:

The draft RTS set out requirements for performance scenarios which are to be defined for the recommended holding period and for certain holding periods in between. The KID is required to include three performance scenarios: an unfavourable scenario, a moderate scenario and a favourable scenario. Annex IV to the RTS sets out the criteria to be used in relation to each scenario. Annex V sets out how the performance scenarios are to be presented, which also includes a template for the narrative to go under the performance scenarios. For insurance-based products, an additional performance scenario must be included reflecting the return the retail investor receives if a covered insurance event occurs.


The draft RTS set out various requirements in relation to the presentation of costs. These require the inclusion of two tables – one entitled “Costs over time” and the other entitled “Composition of costs”. The format of these tables is set out in Annex VII to the RTS.

In the “Costs over time” table, a single figure must be shown as the summary cost indicator of the total aggregated costs of the PRIIP. The methodology for the calculation is set out in Annex VI to the RTS. The figure is required to be expressed in both monetary and percentage terms. If relevant, a narrative must also be included stating that the table takes into account exit penalties. The table must also include a breakdown of one-off costs, recurring costs and incidental costs, all in accordance with methodology specified in Annex VI to the RTS. It must also include an aggregated figure of total costs and a percentage reduction in yield (“RIY”) figure showing the impact of total costs on investor returns.

The “Composition of costs” table must include a narrative explanation of each of the costs specified and must state that the costs presented in the KID may differ from the actual costs the retail investor would pay, including where additional costs may arise where the investor chooses options throughout the life of the investment.

Revision of the KID

The draft RTS set out requirements for revision of the KID by the PRIIP manufacturer. The KID must be reviewed at least every 12 months. As part of the review, the PRIIP manufacturer must verify whether the information contained in the KID continues to be accurate, fair, clear and not misleading, and remains consistent with the content requirements of the KID under the PRIIPs regulation. The PRIIP manufacturer must also conduct an ad hoc review of the KID if it becomes aware of any change that affects or is likely to affect the information contained in the KID. In each case, the PRIIP manufacturer must revise the KID, as appropriate, following such review and that revision must include all information in the KID that needs to be updated so that the KID is up-to-date as a whole.

Timing of Publication of the KID

The draft RTS state that the person advising on or selling the PRIIP will be considered to have provided the KID in “good time” (as required by the PRIIPs Regulation) where they have provided the document sufficiently early for the retail investor to read and consider the document before being bound by any contract or offer relating to the PRIIP. In determining how long the investor needs in this regard, the person advising or selling the PRIIP must take into account, as appropriate: (a) the knowledge and experience of the retail investor with the PRIIP (or a similar PRIIP), (b) the complexity of the PRIIP and (c) the urgency for the retail investor of concluding the proposed contract or offer.

Consultation Questions

The Consultation Paper also sets out various questions where the ESAs seek specific feedback from stakeholders. These include whether the ESAs should clarify further the criteria for the comprehension alert required under the PRIIPs Regulation, whether PRIIPs manufacturers can voluntarily increase the specified risk indicator (this is not currently permitted under the draft RTS), whether the look-through approach in relation to the assessment of credit risk for a PRIIP packaged into another PRIIP is appropriate and whether the presentation of performance scenarios would be better in a graph than a table (or should be presented in both a graph and a table). There are also questions relating to the methodology used for the calculation of transaction costs.

Next Steps

The Consultation is open for response until 29 January 2016. The ESAs state that the final RTS, including feedback on the Consultation Paper, will be submitted to the EU Commission for endorsement by 31 March 2016. PRIIPs manufacturers must prepare and publish a KID for each PRIIP they manufacture for sale to retail investors from 1 January 2017, and, from such date, those selling or advising on PRIIPs must provide a KID to retail investors.