PRIIPs KIDs – EP extends UCITS exemption to 1 January 2023

What's new?

On 23 November 2021, the European Parliament voted, to extend to 31 December 2022 the UCITS exemption from providing a key information document (KID) under the PRIIP Regulation. It also voted through delays to the associated revision to the UCITS Directive for the exemption to continue, which are now set to apply from 1 January 2023.

These positions can be found here:

• Position on the proposed Regulation amending the PRIIPs Regulation.
• Position on the proposed Directive amending the UCITS Directive.

These quick fix amendments, though, are not the last word on the topic - the Council of the European Union (the Council) still needs to endorse the changes before they can be implemented (though it is strongly suspected that it will).

What’s the background?

UCITS are required to produce a PRIIPs KID when marketing to retail investors. However, Article 32 of the PRIIPs Regulation provides a transitional arrangement exempting them.

After the expiry of the UCITS exemption, UCITS managers would have to provide a PRIIPs KID while, at the same time, being required to provide a KIID under the UCITS Directive unless a mechanism for ‘switching off’ the KIID requirement was ‘switched off’. As the exemption under Article 32 of the PRIIPs Regulation is due to expire on 31 December 2021, in July 2021, the European Commission adopted legislative proposals to:

1. extend the UCITS exemption under the PRIIPs Regulation to 1 July 2022; and

2. switch off the requirement for a KIID by amending the UCITS Directive to allow provision of a PRIIPs KID to be deemed compliant with the UCITS Directive KID requirement from 1 July 2022.

The Commission’s legislative proposals were then sent to the European Parliament for consideration with the Members of Parliament (MEPs) adopting the above positions on first reading on Tuesday.

While agreeing the provisions of the Commission’s proposals, the European Parliament has given industry some very welcome extra time to make these changes as the PRIIPs RTS (which include details of what a KID should contain) continue to be hammered out.

If the European Parliament’s view is (as expected) confirmed by the Council, the changes won’t now take effect until 1 January 2023 – and some are calling for a further delay.

What happens next?

If endorsed by the Council, the quick fix amendments adopted by the MEPs will see the PRIIPs Regulation Article 32 transitional arrangement extended to 31 December 2022 with the revisions to the UCTIS Directive set to apply from 1 January 2023.

Once the Council have endorsed the legislative proposals, they will be published in the Official Journal and enter into force the following day.