The European Supervisory Authorities have launched a call for evidence on the EU's Packaged Retail and Insurance-based Investment Products Regulation. The PRIIPs Regulation requires manufacturers of PRIIPs to produce a standardized Key Information Document in an official language of all EU countries into which offerings are made. It also requires those advising on or selling PRIIPs to provide retail investors with KIDs in good time before the investor enters into the investment. The call for evidence closes on December 16, 2021.

The call for evidence covers the topics on which the European Commission has requested technical advice, which include the use of the KID, the practical application of the requirements in the PRIIPs Regulation, whether the requirements would apply to digital media and the scope of the PRIIPs Regulation. The ESAs must provide their advice by April 30, 2022. The ESAs are also seeking input on topics relevant to their previously published recommendations for improving the PRIIPs Regulation. These included clarifying which financial instruments are within the scope of the Regulation and addressing issues of misleading performance scenarios.

The PRIIPs Regulation has been particularly problematical for bond markets and exchange-traded and cleared derivatives. Although intended as a measure to regulate disclosures on packaged retail products, such as FTSE trackers and insurance-wrapped investments, the PRIIPs Regulation established a very broad and generic definition of PRIIPs, which is likely to include most corporate bonds and most kinds of derivatives. At the same time, the PRIIPs Regulation establishes an onerous disclosure and liability regime, including a requirement for issuers to publish complex risk disclosures. A result of this has been the closure in practice of many bond and derivatives markets to retail investors in Europe, an outcome contrary to that being attempted under the EU's Capital Markets Union project. We discussed these issues in our note, "PRIIPS and Capital Markets Transactions: a Better Way Forward?"

The U.K. onshored the EU's PRIIPs Regulation as part of the Brexit transition. Recently, in the Financial Services Act 2021, the performance scenario requirements in the U.K. PRIIPs Regulation have been replaced with a more flexible requirement for "information on performance" to address industry concerns that, in certain circumstances, performance scenarios could be misleading. In addition, the U.K. Financial Conduct Authority was granted new power to make rules specifying whether a product or product category falls within the definition of a PRIIP. In a recent consultation, the FCA proposed rules to clarify that most corporate bonds will not be a PRIIP, and also guidance on when a PRIIP is "made available" to a retail investor (we further detailed the FCA's proposals in our client note, "UK PRIIPs Review"). The final rules and guidance are expected to be confirmed before the end of the year and to apply from January 1, 2022.

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