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What will become of the UCITS-KIID from 2020?

Anger and confusion about the UCITS*-KIID


A few months after the PRIIP directive came into force, it is now possible to make an initial assessment. The proposal to make uniform product information available to private investors throughout Europe in easily understandable language is generally rated as positive. In contrast, however, the implementation specifications are viewed critically, as they partly lead to results that are difficult to comprehend, especially with regard to the key figures to be calculated. In addition, there are further ambiguities, such as how to deal with the existing UCITS-KIID and the new PRIIPs-KID from 2020. Associations and financial sector representatives are calling on the EU Commission to quickly address the shortcomings so that modifications can be made before the European elections in May 2019.


In the following interview with Torsten Lange, Product Specialist at vwd for regulatory solutions, you can read how he assesses the current situation and future developments.

How do you assess the current debate, Mr Lange?

The demands by the associations and representatives of the financial sector are absolutely justified. As things stand today, the transitional period granted to investment funds under the PRIIP directive expires on 31 December 2019. In view of the current legal situation, one possible interpretation is that it would be necessary to provide two mandatory regulatory publications with sometimes widely diverging information. The EU Commission is considering having both documents run in parallel from 2020 on the basis of their statutory frameworks (UCITS and PRIIP) and, if necessary, developing a third explanatory leaflet to ensure the information is comprehensible to investors.

This, however, would completely miss the point and create not more, but less transparency. Furthermore, it would not provide a uniform decision-making basis for buyers of financial products. The aim should be for investors to receive only one uniform EU information sheet for each financial instrument.

Mr Lange, that sounds like an ideal outcome. Do you think it is achievable? At the moment, the question seems to be more whether the required improvements to the current PRIIP directive will be concluded before the European elections.

The European Commission is currently under great pressure to act. Very controversial discussions arose recently between associations and authorities about an extension of the transition phase for UCITS or the continued existence of both regulatory documents from 2020. The EU Commission has three possible courses of action until December 2019:

The most realistic scenario is that, from 2020, a PRIIPs KID will have to be provided for all UCITS funds instead of a UCITS KIID. This variant now requires swift action on the part of the EU Commission to quickly revise problem areas such as the calculation of key figures for performance scenarios or the methodology for costing and presentation, so that sufficient time remains to implement the PRIIP requirements.

A second scenario would be to extend the transitional provisions of the PRIIP obligation for investment funds. According to the British Investment Association (IA) and the Association of Capital Management Companies and Funds (BVI), for example, the need for modifications identified by associations and authorities, as well as the lack of clarity about the further course of action by the EU Commission, suggest a delay in the introduction of the PRIIP directive for UCITS. Contrary to this assumption, the European Supervisory Authorities (ESAs) of the EU Commission assured their support in a letter at the beginning of October. In cooperation with all participants, the feedback is to be compiled in Q4 2018 so that concrete amendment proposals can be submitted to the EU Commission in Q1 2019.

A third, but by now rather unlikely scenario would be if the UCITS-KIID were to remain as an equivalent document to the PRIIPs-KID after 01.01.2020, despite its introduction. This would be the worst option for all concerned, as it runs counter to the principle of a single information document for all PRIIPs, and thus undermines the objectives of the PRIIP directive.

How did vwd deal with the developments and changes in the previous PRIIP directive? Can you give us an example?

vwd is also flexible with regard to regulatory solutions and products in the face of market changes. No matter how the EU Commission decides with regard to the fund industry - we are prepared.
With the revised PRIIPs Q&As of the ESAs in mid-July of this year, for example, there was an amendment regarding the annualization of the performance presentation. This resulted in an adjustment to the standard design of our calculation engine and the sample templates of the structures in our template manager, which we completed without delay by the end of August.

How did the introduction of the new PRIIP directive go at the turn of the year?

We can say proudly that the introduction went well, our IT systems have been running stably from day one in January 2018, and our service application, the vwd template manager, is being used by a wide variety of customer groups and has met with many positive responses.
Of course, with such a complex system and the associated process changes, there are occasional minor malfunctions, but they could all be resolved promptly. We are in direct contact with our customers in the case of problems or modifications. Constant feedback is essential for the further development of our products.

Time for your feedback

We would like to invite you to our next function, the BVI event on 27 November 2018 in Frankfurt. Find out more about our range of services and join us in an exchange of industry experience.

Register here.

One final question: Why should you opt for vwd's PRIIP service?

We help our clients meet complex regulatory requirements efficiently and with the best possible results. They all benefit from our uniform platform strategy, which is the result of years of experience and knowledge of the market. We believe in the financial market and support our customers with regulatory-compliant data, documents and solutions so they can focus more on their core business. We are very closely networked with national and European regulatory authorities and can therefore react very quickly in a complex market.

As a full-service provider, vwd offers everything from a single source.
Here we inform you about our comprehensive solutions for investment companies insurance companies and insurers as well as regulatory compliant calculations, which we assume for your PRIIPs products.

*UCITS= Undertakings for Collective Investments in Transferable Securities