PRIIPs: Final FCA Rules

Of Relevance to:
Most firms providing investments or investment services to retail investors, including AIFMs, UCITS Management Companies and the Authorised Fund Managers of NURS

As advised in Regulatory Roundup 87, the Packaged Retail and Insurance-based Investment Products Regulation (“PRIIPs”) Regulation will apply from 1 January 2018 (although the carve out for UCITS/NURS applies until 31 December 2019).

As a reminder, at its heart the PRIIPs Regulation – which applies to both PRIIPs ‘manufacturers’ and to those that advise on or sell such products – is to help investors better understand and compare the key features, risks, rewards and costs of different PRIIPs by way of a Key Information Document (“KID”) as per Articles 5 and 13 of the PRIIPs Regulation:

  • “Before a PRIIPs is made available to retail investors, the PRIIPs manufacturer shall draw up for that product a key information document in accordance with the requirements of this Regulation and shall publish the document on its website.”
  • “A person advising on, or selling, a PRIIP shall provide retail investors with the key information document in good time before those retail investors are bound by any contract or offer relating to that PRIIP.”

Note that a distributing firm that makes any changes to an existing PRIIP will be regarded as a PRIIP ‘manufacturer’.

The FCA has now published PS17/6 “FCA’s disclosure rules following application of PRIIPs Regulation” containing the final rules. Chapter 2 is certainly worth a read as it gives a high-level overview of the impact of PRIIPs and addresses various issues e.g. the circumstances when the AIF rather than the AIFM would be deemed to be the ‘manufacturer’ of a PRIIP.

The FCA recognises that there are uncertainties on the application of PRIIPs such as what “made available to retail investors” means in the context of PRIIPs that are traded on a securities exchange or when an investment is not intended for retail investors but which could be ‘made available’ via a secondary market.

Unfortunately there are no immediate guidelines which can be referenced to address such issues, but the FCA advises that it will continue to work with European Supervisory Authorities and the European Commission and the FCA “may comment further in a separate communication later this year”.

Annex 2 includes a list of products which the FCA views as either being PRIIPs (e.g. AIFs or derivatives, including contracts for differences) or non-PRIIPs (e.g. ISA wrappers or fixed interest debentures).

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