RRD Investment Management Solutions November Regulatory Update. Covering PRIIPs, Solvency II and also an update from the FCA on "Smarter Consumer Communications"

1. REGULATORY UPDATES – NOVEMBER 2015
PRIIPS / SOLVENCY II / FCA

2. 1. PRIIPS
1.1 Draft Regulatory Technical Standards issued for PRIIPs KID – 11
th
November, 2015
The draft Regulatory Technical Standards for PRIIPs KID were issued this month by the Joint Committee of
European Supervisory Authorities (ESMA, EIOPA & EBA). The draft standards are the outcome of feedback from
consumer testing and market participants providing feedback on both sets of Discussion Papers published earlier
this year.
The consultation paper sets out details on the proposed requirements to be included in the preparation of the KID
including:
 a common mandatory template for each KID, including the texts and layouts to be used
 a summary risk indicator of seven simple classes for the risk and reward section of the KID
 a methodology to assign each PRIIP to one of the seven classes contained in the summary risk indicator, and
for the inclusion of additional warnings and narrative explanations for certain PRIIPs
 details on performance scenarios and a format for their presentation, including possible performance for
different time periods and at least three scenarios
 costs presentation, including the figures that must be calculated and the format to be used for these, i.e., in
both cash and percentage terms
 specific layouts and contents for the KID for products offering multiple options that cannot be effectively
covered in three pages
 the revision and republication of the KID, to be done at least annually
 the KID must be provided sufficiently early for a retail investor to be able to take its contents into account when
making an investment decision
The ESAs will also hold a Public Hearing on KID for PRIIPs in Frankfurt on 9 December in support of this
consultation. The closing date for
stakeholder input is 29 January 2016.
Steven Maijoor, Chair of the Joint
Committee, commented that “Today’s
consultation is a major step forward
for the EU’s retail investors by setting
out clear proposals on the contents of
the KID, which are aimed at
improving safeguards and
transparency around investment
products. The KID, once
implemented, aims to safeguard retail
investors’ interests by ensuring they
receive sufficiently clear, concise and
understandable information to allow
them to make better informed
investment decisions.”

3. 2. SOLVENCY II
2.1 Association of British Insurers Biennial Conference – Solvency Capital Requirements highlighted in
speech given by Sam Woods of the Prudential Regulation Authority
At the beginning of November, the Association of British Insurers held their biennial conference where Solvency II
was amongst the top agenda points, given the looming deadline of 1 Jan 2016. Sam Woods, Executive Director of
Insurance Supervision at the Prudential Regulation Authority (PRA) gave a speech on the current status of
Solvency II whilst also highlighting expectations over the coming months. One area emphasised related to the
Solvency Capital Requirements (SCR) and what “normal would look like under Solvency II”.
Woods mentioned “the height of the bar relating to the amount of sufficient capital that UK firms require to meet the
SCR regulatory requirements which represents a 1-in-200 year standard. Solvency II sets the bar at 1-in-200
broadly equivalent to a BBB rating”. Woods highlighted his concern that “market participants would assume that
there is some other bar, very much higher than the SCR, which firms must somehow meet in order to satisfy
regulators”.
Woods also went on to mention, “I would like to caution market participants against the idea that we have in mind a
single ratio, somewhere very high above the SCR which we have set as an intervention point across the insurance
sector. That would be illegal, would frustrate the intention of legislators to deliver a 1-in-200 level of solvency
across Europe, and would not take into account the different risks firms run”.
Woods pointed out that this should not, however, deter those responsible with running insurance firms in pursuing
a higher capital buffer. Aiming to achieve a higher credit rating could be one example why an insurance firm would
pursue a higher capital buffer.
3. FCA paves the way for “Smarter Consumer Communications”
3.1 Consultation Paper issued by FCA to address certain ineffective disclosure requirements to
consumers
Earlier this month the UK Financial Conduct Authority (FCA) published a consultation paper which addressed the
issues surrounding certain ineffective regulatory disclosure requirements set by the FCA’s handbook and the
potential removal of these requirements. One issue highlighted related to product disclosure requirements and the
potential elimination of short reports.
Short reports, which are issued half yearly and yearly by authorised fund managers, are used to provide retail
investors with regular and relevant information about the progress of an authorised fund and are applicable to both
UCITS schemes and non-UCITS retail schemes.
In the discussion paper entitled “Smarter Consumer Communications”, the FCA suggests that the short report “may
not meet the original aim of providing clear and focused information about the fund” to the retail investor. Short
reports were considered by retail investors to be difficult to understand and contained complex information and
financial jargon. The FCA also considered the issue relating to timely delivery of these reports. Given the time
lapse, the information would be less relevant to the retail investor. Also, if funds are bought through an intermediary
(e.g., via an online platform) many investors may fail to receive the short report.

4. The FCA, although considering the removal of the short report, is seeking feedback on more innovative methods
that could potentially be used to engage and inform the consumer relating to product disclosure. Christopher
Woolard, director of strategy and competition at the FCA, said: “We would like to see firms changing the way they
interact with their customers.” The consultation paper is open for comment until 18 December 2015.
RR Donnelley PRIIPs KID Solution RR Donnelley Solvency II Solution
Fully outsourced, SAAS or hybrid solutions
available:
 Calculation – build in calculation engines
(risk, reward)
 Production – sophisticated workflow
captures activities of multiple stakeholders
 Translation – in-house EU language
solutions
 Review, workflow and transparency –
full audit trail
 Distribution – new regulators; insurance
sales channel
Quality assured, timely provision of Solvency II
compliant asset data:
 Data management – integration, enrichment
and classification
 Quality approved data – automatic data
verification and audit trail
 Solvency II report production – on-
demand, automated reports and SCR
calculations
 Report distribution – monthly / quarterly,
bespoke reports in Solvency II template,
QRTs or customised formats
For further information on European regulations, please contact our Regulatory Solutions Manager:
Patricia Myles
Tel +44 20 3047 6562
patricia.myles@rrd.com
RR Donnelley (Nasdaq:RRD) helps organisations communicate more effectively by working to create, manage, produce, distribute and process
content on behalf of our customers. The company assists customers in developing and executing multichannel communication strategies that
engage audiences, reduce costs, drive revenues and increase compliance. RR Donnelley’s innovative technologies enhance digital and print
communications to deliver integrated messages across multiple media to highly targeted audiences at optimal times for clients in virtually every
private and public sector. Strategically located operations provide local service and responsiveness while leveraging the economic, geographic
and technological advantages of a global organisation.
__________________________________________________________________________________________________________________
LONDON
John McCann
Tel +44 203 047 6187
john.p.mccann@rrd.com
DUBLIN
Robert McNamara
Tel +353 1 818 9971
robert.mcnamara@rrd.com
This regulatory update is for general information purposes only and RR Donnelley does not provide financial advice.