Recitals

THE EUROPEAN COMMISSION,

• Having regard to the Treaty on the Functioning of the European Union,
• Having regard to Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs)⁽¹⁾, and in particular Article 8(5) and Article 10(2) thereof,

Whereas:

1. Experience gained during the first years of application of Commission Delegated Regulation (EU) 2017/653⁽²⁾ has shown that certain elements of presentation and content of key information documents need to be revised. Such revision is necessary to ensure that retail investors continue to be provided with appropriate information across the range of different types of packaged retail and insurance-based investment products (PRIIPs), irrespective of the particular market circumstances, in particular when there has been a sustained period of positive market performance.
2. To provide retail investors with information that is understandable, not misleading, and relevant for different types of PRIIPs, performance scenarios shown in the key information documents should not provide an overly positive outlook for potential future returns. The performance of underlying investments and the performance of non-structured investment funds and other similar PRIIPs are directly linked. The underpinning methodology for the presentation of performance scenarios should therefore be adapted to avoid relying on a statistical method which produces performance scenarios that could amplify observed returns. The underpinning methodology for the presentation of performance scenarios should also be adapted to ensure that those scenarios are based on a longer period of observed returns, capturing both periods of positive and negative growth, thus providing more stable performance scenarios over time and minimising pro-cyclical outcomes. The ability of the methodology for the presentation of performance scenarios to provide appropriate forward-looking estimates has been demonstrated through back-testing which compared the outcomes of that methodology with actual observed performance of PRIIPs.
3. To avoid that performance scenarios are considered as best estimate forecasts, it is necessary to impose more prominent warnings about those scenarios. The disclosure, in simple terms, of additional details on the assumptions on which those scenarios are based should also reduce the risk of inappropriate expectations on possible future returns.
4. Information on costs is important for retail investors when comparing different PRIIPs. To enable retail investors to better understand the different types of cost structures of different PRIIPs and the relevance of those structures to their individual circumstances, information in the key information documents on costs should include a description of the main cost elements. Furthermore, to facilitate advising on and selling PRIIPs, the indicators for individual cost elements should be aligned with information disclosed under sectoral Union legislation, in particular Directive 2014/65/EU of the European Parliament and of the Council⁽³⁾ and Directive (EU) 2016/97 of the European Parliament and of the Council⁽⁴⁾. At the same time, it is necessary to ensure comparability across all types of PRIIPs with regard to total costs. The meaning of summary cost indicators in key information documents should be clarified, so that retail investors are able to better understand such summary cost indicators.
5. To better take into account economic features of certain asset classes and those PRIIPs that do not generate enough transactions to eliminate market movements with enough statistical certainty, the revised methodology for the calculation of transaction costs should use a more differentiated and proportionate approach. That methodology should also eliminate the potential occurrence of negative transaction costs to avoid the risk of confusing retail investors.
6. For PRIIPs offering a range of options for investment, an adjusted presentation of information on costs should be laid down to improve the understanding by retail investors of the cost implications of those different investment options.
7. To allow retail investors to observe, understand and compare the occurrence of volatility in the returns of linear PRIIPs and linear underlying investment options as well as previous performance in given market circumstances, it is necessary to lay down certain requirements on the standardised content and presentation of past performance in Delegated Regulation (EU) 2017/653, by incorporating and adapting certain rules laid down in Commission Regulation (EU) No 583/2010⁽⁵⁾. The standardised content and presentation of past performance should complement the information provided by performance scenarios. The key information documents for those linear PRIIPs and linear underlying investment options should contain in the section titled Other relevant information cross-references to separate documents or websites with past performance information.
8. Pursuant to Article 32(1) of Regulation (EU) No 1286/2014, management companies, investment companies and persons advising on, or selling, units of UCITS are exempt from the obligations under that Regulation until 31 December 2021. When a Member State applies rules on the format and content of the key information document, as laid down in Articles 78 to 81 of Directive 2009/65/EC of the European Parliament and of the Council⁽⁶⁾, to non-UCITS funds offered to retail investors, the exemption laid down in Article 32(1) of Regulation (EU) No 1286/2014 applies to management companies, investment companies and persons advising on, or selling, units of such funds to retail investors. To provide those funds with a consistent transitional legal regime, Article 14(2) of Delegated Regulation 2017/653 which, in accordance with Article 18 of that Delegated Regulation applies until 31 December 2021, allows manufacturers of packaged retail and insurance-based investment products (PRIIP manufacturers) to continue using such documents drawn up in accordance with Articles 78 to 81 of Directive 2009/65/EC, where at least one of the underlying investment options is a UCITS or non-UCITS fund. The Commission proposal for a Regulation of the European Parliament and the Council⁽⁷⁾ amending Regulation (EU) No 1286/2014 proposes to extend the transitional arrangements referred to in Article 32 thereof until 30 June 2022. It is necessary to enable PRIIP manufacturers to continue using documents drawn up in accordance with Articles 78 to 81 of Directive 2009/65/EC for as long as those transitional arrangements are in place.
9. Delegated Regulation (EU) 2017/653 should therefore be amended accordingly.
10. This Regulation is based on the draft regulatory technical standards submitted to the Commission by the European Banking Authority, the European Insurance and Occupational Pensions Authority, and the European Securities and Markets Authority (the European Supervisory Authorities).
11. The European Supervisory Authorities have conducted open public consultations on the draft regulatory technical standards on which this Regulation is based, analysed the potential related costs and benefits, and requested the advice of the Banking Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council⁽⁸⁾, the Insurance and Reinsurance Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1094/2010 of the European Parliament and of the Council⁽⁹⁾, and the Securities and Markets Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1095/2010 of the European Parliament and of the Council⁽¹⁰⁾.
12. Given the fact that the regulatory technical standards are closely related and in order to ensure that the requirements introduced by them are fully consistent, it is appropriate to adopt a single legal act amending the regulatory technical standards laid down in Delegated Regulation (EU) 2017/653.
13. To give PRIIP manufacturers, and persons advising on, or selling, PRIIPs sufficient time to prepare for the obligation to draw up a KID in accordance with the new requirements this Regulation should apply from 1 July 2022,

HAS ADOPTED THIS REGULATION: