ESA consultation on changes to the KID for PRIIPs

The European Supervisory Authorities (ESAs) issued a consultation paper on amendments to existing rules underpinning the key information document (KID) for packaged retail and insurance-based investment products (PRIIPs).

The aims of the review are to:

  • address issues that have been identified by stakeholders and supervisors since the implementation of the KID in 2018
  • make specific changes to allow the rules to be applied to investment funds that are expected to have to prepare a KID from 1 January 2022 onwards

The consultation paper proposes changes relating to the following topic areas:

  • illustrations of what the retail investor might receive in return from their investment (performance scenarios)
  • information on what the costs of the investment are
  • specific issues for different types of investment funds
  • specific issues for PRIIPs offering a range of options for investment (so-called "Multi-Option Products")

As part of this review, the European Commission, with the ESAs, is undertaking a consumer testing exercise to assess the effectiveness of different presentations of performance scenarios. The results are expected in Q1 2020.

The deadline for submission of feedback is 13 January 2020.

ESMA Update on Brexit preparations

On 7 October 2019, ESMA provided an update on the UK's withdrawal from the EU and preparations for a possible no-deal Brexit scenario on 31 October 2019.

The statement confirms that the reference date for Brexit in all of ESMA's previously published measures, issued about the possibility of a no-deal Brexit scenario, should be read as 31 October 2019. The full list of statements and measures issued is included in an annex to the statement.

ESMA explains that if the final timing and conditions of Brexit change, it will adjust its approach for its IT applications and databases and provide information as soon as possible.

ESMA also issued the updated statements on the use of UK data in ESMA databases and performance of transparency calculations, the impact on the application of MiFID II, MiFIR and the Benchmarks Regulation provisions in the event of no-deal Brexit and ESMA's data operational plan.

Use of derivatives by equity UCITS: ESMA report on Trends, Risks and Vulnerabilities

​ESMA issued a report on Trends, Risks and Vulnerabilities on 10 September 2019. Of interest are the articles on:

  • trends in asset management
  • net performance of active and passive equity UCITS
  • use of derivatives by UCITS equity funds

​The study on the use of derivatives by EU-domiciled equity UCITS funds found no support for the notion that such funds use derivatives in order to compensate for performance, or for speculative purposes. By contrast, the study found that the use of derivatives is largely determined by the individual asset manager, and that funds tend to use them to manage inflows in a cost-effective manner.

Benchmarks Regulation consultation

On 11 October 2019, the European Commission published a consultation on the Benchmarks Regulation, closing 6 December. Consultation topics include:

  • the regime for critical benchmarks,
  • the effectiveness of the mechanism for authorisation and registration of EU benchmark administrators,
  • the categorisation of benchmarks
  • the rules for third country benchmarks
  • ESMA's register of administrators and benchmarks
  • possible improvements to benchmark statements
  • climate-related benchmarks
  • commodity benchmarks
  • non-EEA benchmarks.

The EU Commission must review and report on the Benchmarks Regulation to the European Parliament and Council of the EU by 1 January 2020 (Art 54). For our In Focus paper on this topic please contact your usual contact on the A&L Goodbody Asset Management & Investment Funds team.

ESMA work programme for 2020

ESMA published its 2020 work programme for the next 12 months.

  • New mandates. The key challenge facing ESMA in 2020 is the implementation of its new mandates and enhanced role in areas including direct supervision, supervisory convergence, investor protection, relations with third countries, sustainability and technological innovation. This follows the conclusion of the ESAs’ Review, which will involve changes to its mission.
  • Supervisory convergence. ESMA will implement its strengthened convergence powers.
  • Risk assessment. ESMA will focus on ensuring it makes good use of the data it collects.
  • Single rulebook. ESMA will prioritise those areas of its single rulebook work that contribute to the Commission's CMU, sustainable finance and FinTech action plans.

One key uncertainty for 2020 is Brexit. ESMA continues to prepare for both a no-deal Brexit scenario, where it will focus on managing the immediate risks and issues, and the scenario where a withdrawal agreement is in place. This work could have an impact on its other planned priorities.

Joint Committee of ESAs work programme for 2020

On 2 October 2019, the Joint Committee of the ESAs published its work programme for 2020. From 2020, the Joint Committee will have an amended scope. There will be an emphasis on work relating to cybersecurity and retail financial services and depositor, consumer and investor protection issues. In addition, its competence for AML issues will transfer to a permanent internal committee of the EBA (ESMA and EIOPA will continue to contribute to this work).

The Joint Committee's priorities for 2020 include:

  • PRIIPs (amending regulatory technical standards relating to the KID and issuing guidance)
  • financial innovation
  • sustainable finance
  • complaints handling
  • securitisation


The ESA's 2020 Work Programme highlights that the ESA's role in AML issues will transfer to a permanent internal committee of the EBA (ESMA and EIOPA will continue to contribute to this work).

Joint Committee of ESAs opinion on money laundering and terrorist financing risks (October 2019)

On 4 October 2019, the ESAs issued an opinion on the risks of money laundering and terrorist financing affecting the EU's financial sector. The opinion issues every two years under 4AMLD.

The ESAs identified that the main cross-sectoral risks arise from Brexit, new technologies, virtual currencies, legislative divergence and divergent supervisory practices, weaknesses in internal controls, terrorist financing, and de-risking. The opinion lists possible actions which regulators might take to mitigate these risks.

The uncertainty generated by Brexit is described as a key challenge, along with concerns about the ability of competent authorities to adequately supervise the changing population of firms relocating to their member states from the UK following the withdrawal of the UK from the EU.

The opinion includes a sector-specific section. With the opinion, the ESAs published an interactive tool that gives firms a "snapshot" of risks.