On 10 May 2022, the European Supervisory Authorities (ESAs) issued a supervisory statement on expectations regarding the ‘What is this product?’ section of the key information document (KID) for packaged retail and insurance based investment products (PRIIPs).
The supervisory statement is addressed to Member State competent authorities and is delivered on the basis of Article 6(1) to (4) and Article 8(3)(c) of the PRIIPs Regulation and Article 2 and Articles 10 to 14 of Commission Delegated Regulation (EU) 2017/653.
The ‘What is this product?’ section is the first descriptive section of the KID and is an essential part of the document to enable retail investors to understand the key features of the product. It is also a largely “free text” section within the KID template, where it is the responsibility of the PRIIP manufacturer to use appropriate text or language and there are not pre-defined narrative explanations.
The ESAs have issued the supervisory statement as they have identified a range of poor practices in how PRIIP manufacturers describe products under the ‘What is this product?’ section. Many of the issues relate to a general lack of clarity in the text, which makes it difficult for retail investors to understand the key features of products.
The supervisory statement considers those elements of the ‘What is this product?’ section that apply to all types of PRIIPs, including the ‘Type’, ‘Objectives’ and ‘Intended retail investor’ and ‘Term’. However, it adds that this does not mean that there are not issues relating to current practices for the part of this section on the insurance benefits, or regarding other “free text” sections of the KID. The ESAs may, in a next step, set out their views and expectations regarding these other parts of the KID.