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| Financial Law Update | Back to article summary. |
| Work to replace the simplified prospectus continues apace | ||||
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| Following on from the publication of the Committee of European Securities Regulators' consultation paper on the replacement of the Simplified Prospectus in October, work has continued apace on the development of the proposed form and content of Key Investor Information for UCITS. | ||||
As part of its broader UCITS IV initiatives published earlier this year, the European Commission proposed a replacement for the UCITS Simplified Prospectus (SP), referred to as Key Investor Information (KII). The brief for KII is to assist UCITS investors to reach informed investment decisions within a succinct and simple format that is understandable and relevant, bearing in mind that in order to be successful, KII must cover much the same area as the SP whilst avoiding its failures.
In order to formulate and refine its proposals on KII, the Commission requested advice and assistance from the Committee of European Securities Regulators (CESR) to develop the form and content of KII. In response, CESR has completed significant work in this area to date, including the engagement of a full and detailed consultation process with industry which has been conducted in a thorough and efficient manner. In October, CESR published a detailed consultation paper outlining a number of specific recommendations on KII, together with alternative options in areas where testing would be required. Within its consultation paper CESR also highlighted a number of key questions for consideration by industry and to invite stakeholders' views on these. To provide an effective environment for interested parties to gather and to orally respond to the issues raised in its consultation, CESR scheduled an Open Hearing at its headquarters in Paris on 23rd November 2007. Despite the prevailing transport difficulties in Paris at the time, the Open Hearing went ahead as planned with a very strong turnout, and one which was representative of different member states, viewpoints and sectors of the industry. There were robust submissions from the floor for a full three hours, with consensus evident on certain matters but not on others. Issues which were the focus of submissions at the Open Hearing included the proposed use of synthetic risk indicators versus a narrative approach in the context of risk-reward disclosure, the use of building blocks to satisfy KII requirements, extent of KII obligation for funds and the application of KII to intermediaries, content and presentation of KII, proposed exclusion of certain information from KII, issues regarding liability for content, consumer testing, past performance disclosure and information on fees and charges.
Following on from the Open Hearing in November, CESR provided a further opportunity for stakeholders to express their views on KII generally and on the specific queries raised in the consultation paper through written submissions. The deadline for written submissions expired on 14 December 2007, and 51 responses were received by CESR by that date. The full text of these written submissions may be accessed directly through CESR's website, together with a full listing of the contributors, which include Matheson Ormsby Prentice and the Irish Funds Industry Association. Work on KII is set to continue at this significant and committed pace. Following on from the responses to its consultation at the Open Hearing and the detailed written submissions received from interested parties, CESR is due to deliver its guidance to the Commission next month. It will be of considerable interest to review CESR's advice in this regard bearing in mind the challenge of striking the correct balance between remediating aspects of the SP regime on one hand, and presenting an efficient and workable replacement for industry to adopt on the other. Beyond CESR's imminent recommendations, the timetable for testing KII will begin, and the Commission will carry out market testing throughout 2008. It is expected that CESR will then provide further advice based on the results of this testing and final industry consultation, with the Commission expected to adopt its conclusive position thereafter. |
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Michael Jackson is a Partner and Liz Manning is a Consultant in the Asset Management and Investment Funds Group at Matheson Ormsby Prentice and can be contacted at +353 1 232 2000. Further information on Matheson Ormsby Prentice is available at www.mop.ie |
