ESMA says only Ucits are non-complex, but in the UK, many non-Ucits retail schemes (Nurs) and investment trusts may also be non-complex.
The lobby groups that originally campaigned for the alert had hoped that quite a small number of complicated products would be forced to carry the alert, which would scare retail investors enough for those products eventually to disappear.
With most funds across Europe that aren’t Ucits now carrying a comprehension alert, it’s unlikely to have as much impact.
Likely impact: We can expect lots of debate on this around the review, while advisers get used to explaining what the presence of a comprehension alert on a KID really means. To complicate matters, all complex products need a comprehension alert, but not all Priips with an alert are complex.
2) A survey of the practical application of the rules … taking due account of developments in the market for retail investment products
This one should be less controversial, as it acknowledges that, over time, there may be changes to the way we buy and sell retail investment products.
This might change how and when a KID needs to be provided by advisers or platforms, but not the need to deliver it on paper or in a durable medium “in good time” before a sale, as the regulation already covers exceptions to this.
Likely impact: This depends on whether the Commission decides that the current rules are already out of date, but there won’t be any change to the need for Priips to publish and maintain KIDs.
3) The feasibility, costs and possible benefits of introducing a label for social and environmental investments
The regulation hinted towards having some indication of whether a Priip includes environmental or social goals, but conceded that there is no consistent definition of this, so kicked it into the long grass to be addressed as part of the review.
ESG is more embedded in the investment process of many fund groups than it used to be, but self-certification as an ESG fund will not be enough to justify such a label on a KID.
Likely impact: If the Commission comes up with a set of criteria to qualify for an ESG label, they could become a type of “kite mark”, so many funds could update their investment processes to fit in. This could be a slow burner with a growing level of adoption, depending on customer demand.
4) Whether the transitional arrangements [for Ucits KIIDs] shall be prolonged, or whether, following the identification of any necessary adjustments, the provisions on key investor information in [Ucits IV] might be replaced by or considered equivalent to the key investor document
