KID instead of KIID: UCIts to prepare for 1 january 2023 deadline
Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 (“PRIIPs Regulation”) concerns key information documents for packaged retail and insurance-based investment products and applies as from 1 January 2018. The purpose of the PRIIPs Regulation is to improve information disclosures and protection of retail investors with the provision of a key information document (“KID”) prior to the subscription of a packaged retail and insurance-based investment product (“PRIIP”).
UCITS were exempt from preparing a KID and could prepare a key investor information document (“KIID”) instead. Luxembourg manufacturers of undertakings for collective investment (“UCIs”) the units of which are offered or sold to retail investors and persons advising on or selling units of such UCIs (non-UCITS) must comply with the requirements of the PRIIPs Regulation, unless they have chosen to draw up a UCITS-like KIID in conformity with the Luxembourg law of 17 April 2018 on key information documents for packaged retail and insurance-based investment products (“PRIIPs Law”).
The exemption applicable to some UCITs expires on 1 January 2023, from that date UCITS need to produce and provide retail clients with a PRIIPs compliant KID. The PRIIPs legal framework is currently undergoing a process of amendments following a call from the European Supervisory Authorities to address some market considerations, including digital disclosures. As these changes will require an amendment of the PRIIPs Regulation, they are not expected to obligation for UCITS to produce a PRIIP compliant KID by 1 January 2023. We cover some recurrent questions relevant for UCITs management companies.
Am I offering a PRIIP?
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.
What is a KID?
The KID is a pre-sale disclosure document introducing common standards for the presentation of information for retail investors regarding packaged retail and insurance-based investment products which must allow these investors to understand and compare the main risks, features, costs and possible future performance of the products concerned. The template, the form, the narrative and other contents of a KID have been defined in the appendices of the Regulatory Technical Standards (“RTS”).
Must a KID be prepared?
UCITs made available to EEA retail investors in the EU will need to be able to provide a PRIIPs KID as from 1 January 2023. In case a KID is produced, no KIID needs to be prepared.
UCITs made available only to non-EEA retail investors may opt to only prepare KIID based on the UCITS directive.
Who must prepare the KID?
The UCITs management company will usually qualify as the PRIIP manufacturer responsible for the drawing up of the KID. If however, a UCITS operates as a reference to another investment product being made available to EU retail investors, then the product manufacturer of the product sold directly to the retail investors will need to prepare the PRIIP KID.
At what point in time does a KID need to be prepared?
A KID needs to be prepared and published on the website before a PRIIP is made available to retail investors. Moreover, a person advising on, or selling, a PRIIP must provide retail investors with the KID in good time before those retail investors are bound by any contract or offer relating to that PRIIP.
PRIIP KID v UCITS KIID
We assist clients in navigating the complex legal framework and assess whether a KID or KIID needs to be prepared, implement the appropriate technical requirements, product disclosures, governance and oversight requirements of the PRIIPs Regulation. Below you find a short overview of some key elements comparing the PRIIPs KID with the UCITS KID.
|PRIIPs KID||UCITS KID|
|Product||Packaged retail investment products and
insurance-based investment products
|Undertakings for collective investment in transferable securities|
|Responsible Party||Manufacturer (investment firms, credit
institutions, insurance undertakings, fund managers)
|UCITS management company|
|Method of delivery||
|Addressee||Only required when offered to EEA retail investors.||Required when overed to retail and professional
|Timing||In good time before the retail investor is contractually bound||In good time before subscription|
|Frequency||Annual review and update without time constraint||Annual review and past performance update within 35 BD of calendar year end|
|Language||Translation into an official language of each EEA state where the product is distributed (PRIIPs) or a marketing notification (UCITs) is made|
|Filing||Home member state regulator||UCITS home member state regulator + each regulator in the EEA where a marketing notification is made|