After the turbulence and crises that have plagued the financial markets in the past decade, it is unsurprising that the reins on the investment funds industry are being tightened. In recent years, regulations that determine the type and quality of information investors must receive before committing to an investment decision have been imposed.
The guidance on packaged retail investment and insurance-based products (PRIIPs) is the latest in the regulation scene. Asset managers, insurers, and investment banks are scrambling to come up with relevant investor information before the January 2018 regulatory deadline.
Practically speaking, PRIIPs means paperwork, and there is a lot of it.
These institutions must produce key investor documents (KID) for their retail investors and make these three-page documents available in the language(s) of every country where investors live. Potential investors can then read these documents, allowing them to compare products and make informed decisions on how to invest.
The logistics of this operation are complex, not least because of the parties involved in delivering KIDs into the hands of investors. But the good news is this is not exactly new for the language services industry.
In 2011, the Undertakings For The Collective Investment Of Transferable Securities (UCITS IV) introduced a two-page key investor information document (KIID), which was the precursor to the now more widely applicable PRIIPs KID.
The KIID era offers some important lessons that could be helpful to make Operation PRIIPs a success.
As with the UCITS IV regulation, PRIIPs will introduce a huge number of documents (high volume) and the difference between documents will be minimal (high repetition). There are also requirements around plain language and the formatting and length of each document
CMS and non-CMS workflows
Faced with high volumes (approximately 7.5 times more than UCITS), many companies will use content management systems (CMS) to take advantage of the highly repetitive nature of the content.
The CMS works by extracting unique content for translation into a stable file format such as XML, splicing the content, and then cutting out repetitions.
As such, language service providers (LSPs) need to employ a careful risk management strategy.
- File names:
Maintain original file name to avoid issues when the final target files are uploaded to the CMS. File names that are CMS-generated may be very long because of how they are coded, this can be problematic for file storage due to character restrictions.
These are used to indicate names, figures and dates, which are populated when the final content is rendered by the CMS. In many languages, the articles are required before a name, figure or date change — depending on what comes after. Manage this risk by requesting the full list of permutations, and translating them in a separate file for the client to use as reference when compiling the final versions. Also, the use of placeholders is a strong reason to proofread at least a sample of the fully translated KID once generated by the CMS.
It is impossible to picture the final rendered version of the KID and you cannot be sure that the content will fit with the page restrictions. CMS operators can play around a bit with font size, but as a general rule, instruct translators to keep it concise.
Most companies will have some form of CMS, but others will rely on traditional methods of production (Word, PDF, Excel). To handle the full content of the KID, however, companies tailor the workflow and risk management strategies accordingly.
Most translation software can allow users to mimic the work of a CMS by removing repetitions from translatable files. DTP and formatting might be necessary so the time needed to ensure the final documents meet the format and length requirements should be factored in. Otherwise, some content might be hidden in uneditable images or linked documents.
Whether using a CMS or non-CMS workflow, there are linguistic considerations. Content must be consistent with other relevant material (e.g. prospectus, annual report), which companies can request from clients.
In addition, the terminology needs to be discussed with the client and approved in advance. This should include mutual understanding of plain language, as well as glossaries and templates that are normally based on the EU regulation wording.
KIDs will be updated regularly to ensure the content is up-to-date. Unless there are major changes to the product, the linguistic work involved in updating these documents will be minimal. And for clients that use CMS, the process for updates will be quite straightforward.
Non-CMS workflows may receive hundreds or thousands of source files to update, so there will be significant effort required for file handling and engineering. LSPs should price and plan accordingly.
Challenge and Opportunity
Like the UCITS KIID before it, the challenge in producing the PRIIPs KID is the unprecedented demand for volume and speed.
The need to adhere to stringent linguistic, stylistic and formatting requirements is also a concern. The PRIIPs KID will also be rolled out to all UCITS funds in December 2019, replacing the current UCITS KIID and heralding a fresh wave of translation requirements.
While it is clear is that PRIIPs and similar regulations are here to stay, the precise value of the opportunity for LSPs is uncertain.
Costing will vary depending on whether or not clients use CMS and which additional services are required. The one-off administrative costs for PRIIPs KID implementation are estimated at around EUR 170m, and EUR 14m for ongoing costs (updates).
These estimated administrative costs include translation costs as well as advisory, printing, and distribution, among others. There is a slice of a very big pie for everyone.
PRIIPs is disrupting the way the industry thinks about content management and risk processes. Its wider benefit will be in informing translation decisions arising from new content sources, such as live feeds or websites, where there is a real demand to reduce the gap between translation delivery and “real time.”
Managing these regulatory changes is an exercise in adapting to remain competitive, which is likely to pay off in both the short and long term.