Spanish Securities Commission flags targeted PRIIPs compliance gaps in investor Key Information Documents for collective investment and venture capital vehicles

The Spanish Securities Commission (CNMV) has reviewed the investor Key Information Documents (DFI) of collective investment institutions (IIC) and venture capital entities (ECR) to check alignment with the EU Regulation on packaged retail and insurance-based investment products (PRIIPs). The review found that DFI disclosures generally align with the PRIIPs requirements, but identified isolated shortcomings that management companies need to address. The main issues included incomplete disclosure in the product section about the use of derivatives and their purpose (investment or hedging), and missing prospectus-required warnings, especially those relating to investment in low credit quality assets. CNMV also identified PRIIPs risk disclosure problems, including ECR documents that did not always state the required risk level of 6, and a small number of IIC where non-representative benchmarks were used when calculating the risk indicator in the absence of a minimum two-year net asset value history, leading to an underestimated risk level. Further findings covered performance scenarios showing positive returns in stress scenarios for some vehicles (IIC with target-return and buy-and-hold policies, and ECR), and cost disclosures with errors or inconsistencies versus the prospectus or periodic public information, including missing transaction costs for funds with high portfolio turnover. CNMV has communicated the issues to the relevant management companies, asking them to review their DFI drafting procedures and strengthen controls to ensure investor disclosures comply with the European rules, and indicated it will continue to prioritise supervisory attention on this area.