By Jean-Marc Duval, escent Business Consultant Compliance & Regulatory Competence Center. escent is an advisory bureau established in Luxembourg since 2009 specialised for the banking industry in IT projects governance and professional services.
As of January 3rd 2017, a new mandatory document will have to be prepared and provided to retail customers: the PRIIPs KID (Packaged Retail Insurance-based and Investment Products Key Information Document). It will be a highly structured, short document defining the core features of investment products in a non-technical and comparable way. It shall be provided to all retail investors before any service offer is formulated and shall be regularly updated.
In a nutshell, the PRIIPs KID is a requirement similar to the UCITS IV KIID. Yet, PRIIPs KIDs are applicable to a larger set of investment products offered to retail investors (from structured deposits/securities to insurance products and non-UCITS/pension funds). This means that within the coming months all banks, investment firms, asset managers and insurers managing or distributing these investment products will have to assess the impact of this new requirement on their organisation. This means:
- Realising a comprehensive inventory of products falling under the PRIIPs definition;
- Designing a strategy to produce (internal vs. outsourced) and to disseminate KIDs;
- Select and integrate or develop the appropriate tool to manage the large volume of KIDs to produce; and
- Implement appropriate governance and associated processes to create, maintain and distribute KIDs to retail customers.
Experience with UCITS IV has demonstrated that it would be a mistake to underestimate the preparatory work in order to deliver PRIIPs KIDs. The volume of documents to produce, their cross-border distribution, the large set of data required to meet disclosure standards and the short implementation timeframe are only the tip of the iceberg of the challenges that organisations will face in the near future. In order to minimise PRIIPs requirements’ impact on information systems and processes while offering a coherent and professional-looking documents, a solid IT solution is required to support KIDs production.
So far there is sufficient information to initiate the project to guarantee a smooth transition to the PRIIPs disclaimers regime. Draft regulatory technical standards have been published by the ESAs in November 2015 and should be validated by March 2016. Organisations need to rapidly kick off multiple streams of activity in order to gear up for KIDs production: organising translations, optimising data sets to ensure availability for KIDs, selecting the appropriate tool to produce the documents, etc. Failing to act quickly would put organisations under pressure to meet the regulatory deadline and will generate unnecessary costs. It would also mean missing an opportunity to prepare efficient and professional KIDs thus forfeiting a competitive edge.
Receiving support from expert Business/Functional Analysts and Project Managers will help you ensure that no core requirement is left aside, minimise the impact and cost for your organisation to meet regulatory requirements and ensure that the selected solution fits well in the information system. escent can assist your company in this process. Certified business/functional analysts and project managers with relevant experience (such as UCITS IV KIID implementation and process improvements, integration of UCITS KIID solution) and knowledge on the PRIIPs regulation are available to guide you and help you to be PRIIPs KID ready by the end of 2016.
Jean-Marc Duval, Business Consultant Compliance & Regulatory Competence Center
KIID: Key Investor Information Document, requirement for UCITS funds since 2012
ESA: European Supervision Authority (namely ESMA, EIOPA and EBA)