Regulation EU 1286/2014 of the European Parliament and Council regarding Key Information Document (the “KID”) on Packaged Retail and Insurance-based Investment Products (the “PRIIPs”) was introduced in November 2014. The Regulation establishes the requirement for producing a standard short and concise way of presenting to retail investors the key characteristics of investment products.
A PRIIP is defined as “a product manufactured by the financial services industry to provide investment opportunities to retail investors where the amount repayable to the retail investor is subject to fluctuation because of exposure to reference values, or subject to the performance of one or more assets which are not directly purchased by the retail investor.” PRIIPs are therefore a very broad category encompassing a number of investment products including but not limited to futures, options, structured deposits, Contracts for Difference (CFDs), etc.
The Regulation, along with the Regulatory Technical Standards (the “RTS”), commandeers all that PRIIP manufacturers (Fund Managers, Insurance Undertakings, Credit Institutions and Investment Firms) are responsible for when drafting the KID with respect to PRIIPs that are addressed to retail investors. This document must be presented to the retail investor before the sale of a PRIIP.
The KID must contain as a minimum the following information:
- General information regarding the PRIIP Manufacturer;
- PRIIP description;
- Risks and performance scenarios;
- In case of the PRIIP Manufacturer’s insolvency, whether the Client is protected by an Investors’ Compensation Scheme;
- Costs and associated charges;
- Maturity of the PRIIP and whether the possibility of early divestment exists;
- Steps regarding the submission of complaints, and;
- Other relevant information.
The RTS contains in template form the KID document that each PRIIP manufacturer should complete and present to retail investors.
The Regulation provides for strict sanctions in case of non-compliance including pecuniary sanctions and even a selling ban for specific PRIIPs. The relevant provisions come in effect on 1 January 2018.
Our team of high calibre professionals with years of experience in the financial services industry stands ready to assist in the following ways:
- Analysis and impact on your business and its operations;
- Identifying which Investment Products on offer are classified as PRIIPs;
- Drafting the KID document for each PRIIP on offer, and;
- Assistance in setting up an internal review and update programme regarding the KID information.
For more information, please feel free to contact us.