FIN.

ESAs call for improvements to PRIIPs KID

The ESAs have issued a joint supervisory statement regarding the ‘What is this product?’ section of the KID for PRIIPs. It aims to improve the quality of descriptions provided by PRIIPs manufacturers and thereby contribute to better protection of retail investors.

The ESAs have identified a range of poor practices in how PRIIP manufacturers describe products, including a general lack of clarity in the text, which makes it difficult for retail investors to understand the key features of products.

Some of the key issues identified include:

  • the use of overly broad, general categories when specifying the type of product;
  • poor practices regarding the overall clarity of the language and layout of the text, including as a result of automation in creating such texts;
  • insufficient information regarding capital protection levels and potential losses for the investor;
  • imprecise description of early termination features;
  • lack of clarity concerning the nature and timing of the coupon payments;
  • limited information about the specific nature of the underlying assets to which investors are exposed;
  • inadequate description of any leverage factors and the risks related to them; and
  • undifferentiated and abstract descriptions for the ‘intended retail investor’.

Harshil Patel