ESMA’s latest Q&A: which key topics are covered and how has it impacted the AFG?

ESMA’s latest Q&A: which key topics are covered and how has it impacted the AFG?

Thu 04 May 2023

The European Securities and Markets Authority (ESMA) published on 17 November, together with EBA and IOEPA, a Q&A on the RTS of the SFDR Delegated Regulation (Commission Delegated Regulation (EU) 2022/1288), just six weeks before coming into force.

The Q&A clarifies a number of points, including those relating to principal adverse impacts (PAIs) and taxonomic alignment in pre-contractual documents, information on the SGP’s website and periodic reports.


The end of 2022 was marked by the publication of several Q&A aimed at clarifying the expectations related to the implementation of the PRIIPs regulation on 1 January 2023.

ESMA published an update of its Q&A on 14 November 2022.

Some 40 new questions are addressed under the following headings:

  • General topics
  • The “What is this product” section:
    • Distinction between active and passive management.
    • Information for index funds and UCITS ETFs.
  • Determination of market risk:
    • Assessment of the level of risk for Tier 1 instruments that are priced less than once a month.
    • VaR calculation method for certain types of instruments.
  • Performance scenarios.
  • Past performance:
    • First year of a fund.
    • Change of benchmark during the period.
    • Presentation of historical performance of benchmarks.
  • The treatment of derivatives:
    • Case of leveraged products
  • Investment funds:
    • Details for multi-unit and umbrella funds
  • Products with early redemption options:
    • Investment period to be considered in performance scenarios.
  • Calculation of the synthetic cost indicator (Annex VI of the RTS):
    • Special case of a 0% net performance.
  • Presentation of costs (Annex VII of the RTS):
    • Information to be included in the line “Performance-related fees” including when the net performance of the financial product is zero.

Publication by the AFG of its PRIIPs Q&A on 25 November 2022 following ESMA’s recent update

In response to ESMA’s new publication, the AFG has completed its own Q&A, originally published on 19 May 2022 and subsequently updated on 7 July 2022.

The main updates relate to:

  • Performance scenarios:
    • Specific case of changes in investment strategy.
    • Special case of unlisted employee share ownership funds.
  • Cost disclosure:
    • Clarification of the information to be used when the actual entry fees are not known.
    • Treatment of indirect costs for funds of funds.
    • Presentation of turnover fees.

ESMA’s revised version of answers given in previous PRIIPs Q&A

There was a subsequent revision of some answers given in previous Q&A’s. The key issues concerned are as follows:

  • Performance scenarios.
  • Presentation of the CID when the recommended investment period is less than one year.
  • Treatment of derivatives:
    • Provision of “explanatory texts” as provided for in Annex III of the RTS adapted to the use of complex derivatives
  • Transaction costs.
  • The calculation of the synthetic cost indicator.
  • The presentation of costs.