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ESAs Joint Consultation Paper concerning amendments to the PRIIPs KID

On 16 October 2019, European Supervisory Authorities (ESAs) released a consultation paper on the potential amendments to the PRIIPs Delegated Regulation. The goal of the proposed changes is to address the concerns raised by stakeholders after the first version of PRIIPS was released in March 2017.

Main issues that have been identified are, among others, unrealistic future performance scenarios based on the historical growth returns that are prone to pro-cyclicity, misleading presentation of costs and computation of the transaction costs. The Consultation Paper presents possible changes of the methodologies for disclosing this information. Agreed amendments could be applied in 2021, which is the last year before UCITS Investment Funds will be no longer granted with exemption from PRIIPs Regulation.

For “Future Performance Calculation”, the ESAs propose to estimate the growth rate of a PRIIP with the use of a dividend yield methodology as well as a new approach to derive quantiles for different scenarios, based on log-normal distribution and Monte Carlo simulation. Along with the changes, the ESAs consider removing the stress performance scenario and intermediate period scenario, including the information on past performance for Category 2 and 4 and adding the illustrative scenarios for
Category 3.

Transaction Cost changes are mostly linked to the concerns in the market with the “Slippage Approach” or the “Arrival Price/Full PRIIPs Method” of the PRIIPs Regulation. Regulation. The ESAs are of the opinion that the current methodology should be kept with some amendments. However, they have proposed one new alternative approach:

 

  • Introduction of a proportionality threshold to the current Full PRIIPs methodology that exempts PRIIPs with a small number of transactions or low portfolio turnover
  • A new “principles-based” approach that is less prescriptive for the arrival price method by using a justified “reference” price and provides more derogation to alternative approaches for a higher number of situations

 

The ESAs are of the opinion that as with the new options some discretion is provided to the PRIIP manufactures it might lead to inconsistencies in how different PRIIP manufacturers report the costs.

acarda, as a leading full-service provider in the regulatory domain, is actively analyzing market practices and will propose practical rules to be applied for reference prices. We are attending on 29 th of November the ESAs public hearing with asset managers and consumer representatives. The PRIIPs module arepcurrently uses a hybrid approach that incorporates both market practices, the Basis Points and the Arrival Price method, and will adopt the proposed methodologies once they are finalized.

For the UK and pension fund market acarda calculates the Full PRIIPs based transaction costs with a detailed asset class breakdown. More about UK pension scheme and new CTI standard find here.

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.

More

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.

More

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.

More

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.

More

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

acarda, a leading European RegTech company and part of LPA Group, has announced a coorperation with InReg, a regulatory maintenance provider that specialises in monitoring changes occurring within the regulatory updates for the asset management and life insurance sectors.

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