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WMDatenservice’s Heer Talks up European Potential of New German Financial Instrument Documentation Standards

Germany has recently introduced a new product information standard, called Produktinformationsblatt (shortened to the acronym PIB), that is an extension of the concept of the Key Investor Information Documents (KIID) under UCITS and aims to standardise the formatting of product information for the benefit of investors. Markus Heer, managing director of German data vendor WMDatenservice, who also happens to be vice chairman of the Association of National Numbering Agencies (ANNA), speaks to  Reference Data Review about the development process thus far and the standard’s potential in Europe.

With the aim of strengthening investor protection and improving the efficiency of the financial markets, the German government opted to introduce a new regulation to extend the KIID requirements, first introduced by UCITS IV, to cover financial instruments beyond those covered by the European directive. The idea is that a product information sheet can be used for all instruments to provide a basic level of data to investors about the relevant securities in a succinct and clear manner. Germany began moving in this direction last year and the financial markets regulator Bafin finalised the relevant legislation in February.

The legislation goes beyond the Securities Prospectus Act (Wertpapierprospektgesetz) and requires issuers to prepare an information sheet on the relevant securities so that investors can more easily compare the products of different issuers. Subsequently, the regulator tasked the industry with the job of developing the format of the PIB and this is what data vendors such as WMDatenservice and SIX Telekurs have both been working on over the last few months.

Heer indicates that the documents are high level in their summary and must contain a reference to the relevant instrument’s prospectus, which will remain the legal basis of the decision to purchase any financial instruments (data liability therefore remains with the prospectus). However, the PIB will contain valuable information with regards to the risks involved in a particular instrument on which basis the investor may decide to drill down further. It will also contain information about the sector that the instrument is from.

“We have helped to break down the instruments into 70 different types at a high level initially and we have come up with broad descriptions of the risks involved in each of these instruments,” says Heer of the work that has taken the last three months to finalise. Bafin is now examining the vendor’s proposals, alongside those of other market participants (including data vendor rival SIX Telekurs) and will be providing feedback on the submissions in the near future.

Heer, who has also been an active promoter of ANNA’s potential in the legal entity space over recent months, reckons this work will play a part in shaping the discussions around the KIID requirements at a European level under the next iteration of UCITS and beyond. Austria and Switzerland in particular are taking a keen interest in the German developments and may follow suit before European legislation is put in place.

He notes, however, that any attempt to try and capture the same level of risk and categorical information for all of the 1.2 million instruments that are in the potential securities universe would not be feasible at this point.

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