On 10 May 2022 the European Securities and Markets Authority (ESMA) published on its website the Joint ESA 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.
Summary of key issues raised:
- For the section “Type of PRIIP”: PRIIP manufacturers are urged to provide a short, concise and easy to understand description of the product, and avoid technical terms or legal terminology that the intended retail investor is unlikely to understands.
- For the section “Objectives and Term of PRIIP”:
- The main features of the product such as the way it works, its risk/return profile, the extent of capital protection and its term, must be described in sufficiently clear, and understandable terms.
- For products such as CFDs, or Turbo Certificates, ESAs expect more information as part of the ‘Objectives’ section regarding the relationship between the payoff of the product and the underlying asset, the dynamic or constant nature of the leverage factor, its value, and the factors that underpin its variability (e.g., explicit disclosure of the constant leverage factor, or a field containing explicit information on the potential effects of the dynamic leverage factor).
- For the section “Intended Retail Investor”: The customer knowledge levels, the intended investment horizon of the customer, as well as their loss-bearing capacity, must be adequately defined and briefly explained where possible.
This Supervisory Statement is addressed to the National Competent Authorities and has been adopted by the ESA’s Boards of Supervisors.
How can Complyport EU (formerly MAP S.Platis) assist you?
- Analyse the narratives across the KID to ensure compliance.
- Review the KID for consistency with both Regulations, Guidelines and Supervisory Statements.
Contact us for more information on how we may assist you.
