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PRIIPS

Key information documents for packaged retail and insurance-based investment products (PRIIPs)

The regulation on key information documents for packaged retail and insurance-based investment products (PRIIPs regulation), published at the end of 2014, aims at improving transparency of PRIIPs offered to retail investors and to ultimately increase investor protection through the issuance of uniform Key Information Documents (KIDs).

What are PRIIPs?

The regulation defines PRIIPs as any product that is one or both of the following:

  • packaged retail investment product, i.e. an investment, including instruments issued by special purpose vehicles or securitisation special purpose entities, 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;
  • insurance-based investment product, i.e. an insurance product which offers a maturity or surrender value and where that maturity or surrender value is wholly or partially exposed, directly or indirectly, to market fluctuations.

Products defined as PRIIPs do thus amongst others include:

  • Structured financial products, such as options that are part of insurance schemes, securities or banking products;
  • Financial products that derive their values from an underlying, such as shares or currency rates (derivatives);
  • Closed-ended and open-ended investment funds (UCITS authorized pursuant to Directive 2009/65 are exempt from the obligations under the PRIIPs regulation until 31 December 2019);
  • Investment based insurance products, such as unit-linked policies.

What are KIDs and what information should they provide?

Retail investors should be provided with necessary information to make substantiated investment decisions through uniform Key Information Documents (KIDs) relating to PRIIPs. The KIDs furthermore aim at increasing comparability among PRIIPs offered to retail investors.

In order to make KIDs understandable, they are to be limited to three A4 pages and should only contain key information, including:

  • The nature and the main features of the PRIIP;
  • A brief description of the risk-reward profile, including the possible maximum loss of invested capital and appropriate performance scenarios;
  • A brief description of whether related losses are covered by an investor compensation or guarantee scheme;
  • The costs associated with an investment, including both direct and indirect costs;
  • Information relating to the holding period of the investment;
  • A brief indication of any additional information documents to be provided to the retail investor at the pre-contractual and/or the post-contractual stage.

Timeline and recent developments

The Key Information Document, as provided for in the PRIIPs regulation, will need to be provided from 1 January 2018 (with a transitional period for UCITS).

Important dates relating to to the PRIIPs regulation include:

 

On 4th of July 2017 the ESAs published the first set of Questions and Answers (Q&A) related to the Key Information Document (KID) requirements for Packaged Retail and Insurance-based Investment Products (PRIIPs)

The final recommendations were published on 8th of February 2019 by the ESA. The ESA decided to initiate a revision of the PRIIPs Regulation to be undertaken in 2019, including to launch a consultation on the draft Regulatory Technical Standards.

CVA Services GmbH has performed an analysis of important clarifications by the ESAs and the specific impact of the PRIIPs regulation on investment funds

Latest update: 11.02.2019

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Your Contact Partner

Stefan Zur

Stefan Zur

Phone: +49 157 82 62 7777

E-Mail: stefan.zur@cva-services.eu

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CVA Services GmbH
Bettinastraße 30
60325 Frankfurt am Main
Tel.: + 49 69 974 61 142
Mobil: +49 157 8262 7777
info@cva-services.eu
CVA Services GmbH is a Consultancy firm focusing on implementing strategies and regulatory requirements into the day-to-day operations of banks and other financial institutions - Managing Financial Transformation.
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