amending Directive 2009/65/EC as regards the use of key information documents by management companies of undertakings for collective investment in transferable securities (UCITS)

EXPLANATORY MEMORANDUM

1.CONTEXT OF THE PROPOSAL

Reasons for and objectives of the proposal

Each undertaking for collective investment in transferable securities (UCITS) must provide ‘key investor information’ in accordance with Directive 2009/65/EC. The information on objectives and investment policy, risk and reward profile, charges, past performance and other practical details helps investors to understand the essential characteristics of the UCITS and to make informed investment decisions. Articles 78 to 82, and 94 of the Directive specify the main principles of the key investor information. Commission Regulation (EU) No 583/2010 lays down further rules on its content and format. UCITS qualify as packaged retail and insurance-based investment products (PRIIPs) within the meaning of Regulation (EU) No 1286/2014, which requires that all PRIIPs be accompanied by a ‘key information document’. The document contains information on the PRIIP’s risk and reward profile, including the possible maximum loss of invested capital and appropriate performance scenarios, the costs retail investors have to bear when investing in it, and other details. Again, this information helps retail investors to understand the essential characteristics of the product and to make informed investment decisions. Commission Delegated Regulation (EU) 2017/653 lays down detailed rules on the presentation, content, review, revision and provision of the document. Delegated Regulation (EU) 2016/1904 lays down rules on product intervention.

Article 32 of Regulation (EU) No 1286/2014 provides for a transitional arrangement whereby management companies, investment companies and persons advising on, or selling, units of UCITS and non-UCITS are temporarily exempted from the requirement to provide retail investors with a key information document. The arrangement currently applies until 31 December 2021.

This Directive is accompanied by two further measures. First, the Commission is proposing that the transitional arrangement in Regulation (EU) No 1286/2014 be extended to 30 June 2022. This will allow the time necessary to prepare for the end of the transitional arrangement and to implement the other measure (which involves amendments to Delegated Regulation (EU) 2017/653) from 1 July 2022. The three measures are therefore synchronised in terms of application dates.

As things stand, as of 1 July 2022 retail investors in UCITS would receive both a key information document in accordance with Regulation (EU) No 1286/2014 and key investor information in accordance with Directive 2009/65/EC. It is desirable to avoid a situation where retail investors receive two different pre-contractual disclosure documents in respect of the same UCITS. This Directive ensures that a key information document drawn up, provided, revised and translated for a given UCITS in accordance with the Regulation is considered as satisfying the key investor information requirements of Directive 2009/65/EC. This initiative is not part of the regulatory fitness programme (REFIT).

Consistency with existing policy provisions in the policy area

Delegated Regulation (EU) 2017/653 specifies the presentation and content of the key information document for PRIIPs, its standardised format, the methodology for presenting risk and reward and calculating costs, the conditions and minimum frequency for reviewing the information and conditions on providing the document to retail investors. The European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA) jointly submitted draft amendments to the regulatory technical standards in the Regulation, including technical adjustments to facilitate the application of the rules to UCITS.

This proposal seeks to ensure that key information documents that comply with Regulation (EU) No 1286/2014 are considered as satisfying the requirements for key investor information for UCITS in Articles 78 to 82, and 94 of Directive 2009/65/EC.

Consistency with other Union policies

The Commission’s top priority is to strengthen the EU economy and stimulate investment so as to create jobs in all 27 Member States, by creating a deeper single market for capital — or capital markets union (CMU). Better retail investor legislation can be expected to bring benefits in other policy areas where business-to-consumer transactions play an important role.

This proposal aims to avoid a situation where two different pre-contractual disclosure documents are made available to retail investors in respect of the same UCITS. The key information document will enable retail investors to compare the essential economic and legal characteristics of UCITS with those of other PRIIPs. As regards pre-contractual disclosure, manufacturers and persons advising on, or selling, UCITS will only have to comply with legal obligations under Regulation (EU) No 1286/2014. This proposal contributes to the development of more integrated capital markets by making it easier for retail investors, fund managers and, in consequence, invested companies to benefit from the single market.

2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

Legal basis

This proposal is based on Article 53(1) of the Treaty on the Functioning of the European Union, which is the legal basis for Directive 2009/65/EC.

Subsidiarity (for non-exclusive competence)