Time is running out to comply with the European Union’s (EU) new Packaged Retail and Insurance-based Investment Products (PRIIPs) reporting requirements, and adjust to new formats and content for preparing key investor documents (KIDs) by January 1, 2023. On top of this, the regulation will extend to all Undertakings for Collective Investment in Transferrable Securities (UCITS) products that have an exemption in place until December 31, 2022. Meanwhile, many other regulatory initiatives are underway, particularly focused on ESG. Asset managers, banking institutions, insurance companies, and other firms must adopt a streamlined and efficient approach to their data, calculations, and processes to meet the PRIIPs and other evolving regulatory requirements. As the deadline quickly approaches, now is the time to review your platforms, data and processes for required features and connectivity, perform gap analyses, and modify and test your systems and workflows before the end of the transitional period.
FIve main challenges to be aware of when preparing data, systems, and processes for priips:1. Missing Data You will need 10 years of historical NAV data, either actual fund history, where available, or representative proxy/index data. Products with more than a five-year recommended holding period will require a greater extent of history. You will also need a record of all portfolio transaction costs since January 1, 2018, based on arrival and trade value, and fill any data gaps. 2. Constrained Resources Your compliance, legal and operations teams may be stretched thin as the PRIIPs deadline runs parallel with the EU Taxonomy and Sustainable Finance Disclosure Regulation (SFDR) and other regulations. 3. Separate UK KIIDs/KIDs You will need to produce two stand-alone documents for UCITS products: an English UCITS-like KIID for UK investors and a PRIIPs KID for EU investors. Instances that require a PRIIPs KID in the UK will have a different version of the document for Europe with the removal of performance scenarios and a different methodology for transaction costs.
4. EPT Template and Data Connectivity You may also need to create different versions of the European PRIIPs template (EPT): a UK version for UK-based insurance providers and an EU version for EU-based providers. The EU EPT, per the latest FinDatEx guidance, should align at all times to the PRIIPs KID data and figures only updated when the PRIIPs KID is updated – a significant change for many asset manager processes today. 5. Different Regulation Interpretations Debates continue around the European PRIIPs Template, FCA calculations and the transaction cost floor, among others. Confusion around different interpretations of the regulatory language within the KID may hold up progress and cause missteps.
Seven must-have priips capabilitiesThe right PRIIPs solution should help you streamline the entire process – from pre-production of KIDs to compliance monitoring, including the calculation of ex-ante costs, summary risk indicators and performance scenarios. It should improve operational efficiency, maintain data integrity, and reduce risk and total cost of ownership. Whether you build/modify, buy or outsource, here are the eight main attributes you should look for:
- End-to-end capabilities
- Control and flexibility
- Simplified document approval
- A managed service option
- Regulatory and industry expertise
- Full transparency
- Multi-jurisdictional capabilities
GET STARTED NOWTime is running out fast. Your firm should be talking to providers now to start onboarding plans in September, complete onboarding by November, and be fully tested and ready to go by early December. If you are puzzled by the different PRIIPs interpretations, concerned about your current reporting capabilities, or are unsure of how your teams will handle the additional workload, we can help you sort it out. Talk with us today.
LEARN MORERead our full article, “Preparing for PRIIPs KID: Key Considerations,” for a deeper dive on:
- The main challenges of meeting the PRIIPs reporting requirement
- Best practices for ensuring you have a solid framework in place
- The full checklist of must-have PRIIPs solution features