On June 28, 2024, the European Supervisory Authorities (ESA) provided an update to their PRIIPs Q&As and introduced a new Question and Answer in General topics.
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The European Securities and Markets Authority (ESMA) has officially published an updated Opinion setting out its proposals for desirable improvements to the overall European Sustainable Finance Regulatory Framework.
The Q&As document encompasses the guidance of the European Supervisory Authorities (ESAs) on the application and implementation of the PRIIPs Regulation and its Level 2 Delegated Acts. It addresses questions related to the interpretation of PRIIP Regulation and Regulatory Technical Standards (RTS).
The newly added Q&A is outlined as follows:
Section I : General Topics
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Q&A 13 clarifies whether FX Forwards should fall under the scope of the PRIIPs regulation
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The interpretation by the European Commission confirms that FX Forwards are included within the scope of PRIIPs, ensuring they comply with the relevant regulatory requirements.
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According to Article 4(1) of the PRIIPs Regulation, a PRIIP is an investment where the repayable amount to the retail investor fluctuates due to exposure to reference values or asset performance not directly purchased by the investor.
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Article 4(3) of the PRIIPs Regulation defines a “packaged retail and insurance-based investment product” (PRIIP) as any product that falls under either of the following categories:
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(a) A packaged retail investment product (PRIP);
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(b) An insurance-based investment product.
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FX Forwards are classified as financial instruments under Directive 2014/65/EU. Their value, and the amount repayable to investors, fluctuates based on interest and FX rate changes. Thus, they are considered PRIIPs under Article 4(1) and Article 4(3) of the PRIIPs Regulation.
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