The long-awaited update to the Packaged Retail and Insurance-based Investment Product (“PRIIPs) rules has arrived.
Earlier this month the FCA issued Policy Statement 22/2 which looks to fix the most harmful issues within the current regime, rather than overhauling it in its entirety.
Those who produce KIDs will be pleased that the often-misleading performance scenario tables are no longer required. A narrative on performance must be produced instead. Guidance has been given on what the narrative should include, as well a minimum requirement, but it is not prescriptive and should prove far easier for your team to navigate.
Alas, the methodologies that sat behind the performance scenarios do not entirely disappear. Firms will still need to use these to calculate the all-important SRI score shown on the KID. There is also a new requirement to increase the SRI where the score arising from the methodology underestimates the risk of the product.
Other aspects of the new rules include:
VCTs must carry a SRI score of at least 6, which must be upgraded to a 7 if this is considered too low.
New guidance of what products sit inside and outside the scope of the rules, clearing up existing ambiguity.
Changes to transaction cost calculations, aimed at addressing concerns over the “slippage” methodology.
The new rules come into force immediately, which many will welcome, but firms have until 31 December to implement the changes under the transitional provisions.