PRIIPs

WHAT IS PRIIPS?

PRIIPs is the regulatory regime that applies to the distribution of Packaged Retail and Insurance-based Investments Products to retail clients. The regime covers a very wide range of investment products from the most “vanilla” investment funds to the most complex derivatives.

Why is PRIIPs Important?

PIMFA members play an important role in distributing PRIIPs to retail clients. Consequently, we want to ensure that the product information that our members are required to provide to their clients is as concise, engaging and useful as possible.

What does the PRIIPs regime aim to do?

Taking effect on 1 January 2018, the PRIIPs regime aims to improve the quality of information provided to retail investors purchasing a wide range of financial products including non-UCITS collectives, investment trusts, VCTs, structured products, options, futures, CFDs and certain debt securities. The Key Information Document presents data on product risks, costs and performance in a standardised format so that potential investors can compare different types of products and come to informed investment decisions.

Product manufacturers are responsible for producing the KID while product distributors – firms that advise on PRIIPs or execute deals in PRIIPs – are required to provide a KID “in good time before” a retail investor is bound by any contract.

Has the PRIIPs regime delivered?

Despite the regime’s good intentions, there were widespread doubts about its likely effectiveness even before it came into effect. In the period since, those doubts have only grown. It now seems clear that KIDs are not providing investors with the clear and concise information they need and that the vast majority of PRIIPs KIDs provided by distributors are not even looked at.

What next for the PRIIPs regime?

In December 2022, HM Treasury published a consultation which acknowledged that “The PRIIPs Regulation …. is not fit for purpose.” Consequently, the Government has decided that UK PRIIPs legislation will be revoked. It will be replaced by a new product disclosure regime that will sit within the FCA Handbook, enabling the regulator to review and update it as markets evolve.

HM Treasury’s consultation seeks views on how a new product disclosure regime can meet consumer needs without repeating the mistakes of PRIIPs. While making clear that PRIIPs reform is its immediate priority, the paper also recognises that there is a need for a wider review of retail disclosure requirements and sets out the principles that will govern this process.

Alongside the HM Treasury paper, the FCA issued Discussion Paper 22/6 seeking preliminary feedback on how it should approach developing a replacement product regime for PRIIPs and wider reform of retail disclosures. Our “UK Retail Disclosure” material provides further information.

PIMFA’s position on the PRIIPs regime?

Since the earliest days of the regime, PIMFA has highlighted the many flaws of the KID as a disclosure document – too long, too complex and frequently misleading – and has called for a fundamental review of the entire PRIIPs approach.

Consequently, PIMFA has welcomed HM Treasury’s decision to revoke the PRIIPs Regulation and to replace it with a UK-specific regime. In responding to the consultation, we have made clear that product disclosure should not place needless constraints on investor choice as the PRIIPs regime currently does but should instead provide information that is consistent, straightforward and concise, helping consumers to choose between products of similar types.