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ESAs hearing in November: acarda tackling changes regarding Key Information Document (KID) for Packaged Retail and Insurance-based Investment Products (PRIIPs)

On November 29, the European Supervisory Authorities (ESAs) held a public hearing on their Consultation Paper issued in October 2019. The Consultation Paper included potential amendments for the PRIIPs regulations (Packaged Retail and Insurance-based Investment Products (PRIIPs) and Key Information Documents (KIDs).

The KID for PRIIPs is a mandatory, three-page A4 informative document to be provided to consumers before purchasing a PRIIP. PRIIPs include investment funds, structured products and unit-linked and with-profits life insurance contracts.

The hearing was hosted by the European Working Group and brought together around 100 participants from the industry including key asset managers, consumer representatives and other stakeholders from all over the EU. The working group presented the changes proposed in the Consultation Paper. The topics with the most forceful impact are:

 

  • New performance scenarios calculation with a dividend yield methodology to estimate the growth rate instead of using pro-cyclical historical growth returns
  • Using procyclical historical growth returns
  • Obligation to provide PRIIPs KIDs from 2021 onwards
  • Detailed cost disclosure for multi-option insurance products (MOPs)
  • Obligatory implicit transaction cost calculation based on market prices
Acarda EU flags

The participants’ feedback will be considered until the end of Q1 2020, when the final changes will be published. Most members of the audience raised concerns over Risk and Performance Scenarios, namely that the proposed future performance methodology would be too complex and costly to implement. Nevertheless, they supported the ESAs’ decision to amend the current approach, as it is misleading for consumers, and asked for simpler alternatives to it.

Another issue that was discussed during the hearing was the cost disclosure for Generic KID and Specific Information Document of MOPs. The ESAs want the insurers to provide full cost disclosure of the most relevant investment options held by a MOP. Currently, the costs in Generic KID are presented in ranges and must be linked to Specific Information Document which can be challenging for the retail investor. The industry shared their doubts on the proposed amendments and supported the UCITS KID cost presentation as a widely understood document within the market.

Additionally, the topic of transaction cost calculation was addressed. The ESAs definitely hold on the slippage cost methodology but offer some enhancements like eliminating negative transaction costs as this might be misunderstood by the consumers. However, most of the negative cost cases that were examined by the authority were due to human error, not the methodology itself. The ESAs also introduced the proportionality threshold to the current full PRIIPs methodology that exempts PRIIPs with a small number of transactions or low portfolio turnover. However, this was criticized by the stakeholders as this might create the incentive in the industry to stay under the thresholds and use the exemptions.

The representatives of the Working Group highlighted that ESAs are continuously working on the amendments to rules and are welcoming any further feedback before the final changes are announced. As a leading service provider for PRIIPs regulatory reporting, acarda is actively conducting a comprehensive review and gathering the market opinions from the Insurance and Asset Management Industries.

Gerhard Jovy, CEO of acarda

We understand the issues to adapt the methodologies, however we agree that proposed amendments will increase transparency and standardisation of the PRIIPs reportings and improve the quality of disclosed costs. Our regulatory platform arep include all necessary calculations and optimises transaction cost with several market data providers.

More news…

European Commission considers to extend the exemption period of UCITS KIID following the postponement of new PRIIPs RTS

As anticipated, the European Commission published a consultation paper on 15 July 2021 requesting to extend the exemption period for the UCITS KIID until 30 June 2022.

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CRR II: new reporting regulation from July 2021. What to consider now.

By the end of June 2021 the updated Capital Requirement Regulation (CRR II) came into force. The goal of the EU regulation is to introduce a more risk-sensitive framework for management credit risks. One of the key outcomes of CRR II will be a stricter client reporting and disclosure regime.

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New standards for PRIIPs-KIDs as of July 01, 2022

According to information from the German Investment and Asset Management Association (BVI) dated May 21, 2021, the EU Commission plans to delay the start of PRIIPs-KIDsby six months. A package of measures, which will include not only technical adjustments to Level 2 but also a selective amendment to the Level 1 Regulation, is to be forwarded by the EU Commission to the EU Parliament and Council before the end of June 2021.

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European Commission considers to extend the exemption period of UCITS KIID following the postponement of new PRIIPs RTS

As anticipated, the European Commission published a consultation paper on 15 July 2021 requesting to extend the exemption period for the UCITS KIID until 30 June 2022.

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CRR II: new reporting regulation from July 2021. What to consider now.

By the end of June 2021 the updated Capital Requirement Regulation (CRR II) came into force. The goal of the EU regulation is to introduce a more risk-sensitive framework for management credit risks. One of the key outcomes of CRR II will be a stricter client reporting and disclosure regime.

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New standards for PRIIPs-KIDs as of July 01, 2022

According to information from the German Investment and Asset Management Association (BVI) dated May 21, 2021, the EU Commission plans to delay the start of PRIIPs-KIDsby six months. A package of measures, which will include not only technical adjustments to Level 2 but also a selective amendment to the Level 1 Regulation, is to be forwarded by the EU Commission to the EU Parliament and Council before the end of June 2021.

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ESMA updates its FAQs on AIFMD

On 28th May 2021, ESMA published an update on its FAQ on the application of the Alternative Investment Fund Managers Directive (AIFMD).
Three new questions related to Annex IV reporting were added to the document. In the Section III question number 84, 85 and 86, ESMA provided detailed explanations and examples on the reporting obligation of NET DV01, NET CS01 and NET Equity Delta of the AIF.

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acarda adds InReg for increased European regulatory monitoring

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