Manufacturers and sellers of packaged retail investment products and insurance-based investment products will need to provide retail investors with a Key Information Document at the end of this year.
On 30 June 2016, the European Commission adopted a delegated act supplementing Regulation (EU) No 1286/2014 of the European Parliament and Council (26 November 2014) on key information documents for packaged retail and insurance-based investment products ("PRIIPs") (the "PRIIPs Regulation"). The delegated act introduces regulatory technical standards specifying the content and underlying methodology of the Key Information Document ("KID") that will have to be provided to retail investors when they buy certain investment products from 31 December 2016.
What is a PRIIP?
The definition of a PRIIP is wide and captures many investment products. A PRIIP is an investment where, regardless of the legal form of the investment, the amount repayable to the retail investor is subject to fluctuations because of exposure to reference values or to the performance of one or more assets which are not directly purchased by the retail investor and an "insurance-based investment product" is an insurance product which offers a maturity or surrender value where that maturity or surrender value is wholly or partially exposed, directly or indirectly, to market fluctuations.
Products such as investment funds (including UCITS funds) and insurance investment products such as unit-linked policies are therefore considered PRIIPs and come within scope of the PRIIPs Regulation. However, while UCITS funds meet the definition of PRIIPs, the existing UCITS Directive already contains a requirement for a Key Investor Information Document, which is largely similar to the KID. For this reason, the PRIIPs Regulation gives UCITS providers a transitional period up to 31 December 2019 during which they will be exempt from its terms. Alternative Investment Funds must...