Regulation 2014/1286 - Key information documents for packaged retail and insurance-based investment products (PRIIPs) - Main contents

Summary of Legislation
Legislative text

1. Summary of Legislation

Key information about investment products

SUMMARY OF:

Regulation (EU) No 1286/2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs)

WHAT IS THE AIM OF THE REGULATION?

It obliges those who produce or sell investment products to provide retail investors with ‘key information documents’ (KIDs) about the products.

The aim is to help investors to understand and compare the key features and risks of these products.

KEY POINTS

Key information for retail investors

The producer of an investment product intended to be sold to retail investors has to provide a KID concerning the product. Those selling or advising on these investment products have to provide the KID to an investor before any agreement is made.

KIDs should be a maximum of 3 pages and provide clear information on a product allowing the investor to take an informed investment decision.

KIDs should include the following information:

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the name of the product and the identity of the producer;
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the types of investors to whom it is intended to market the financial product;
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the risk and reward profile of the financial product, which includes a summary risk indicator, the possible maximum loss of invested capital and appropriate performance scenarios of the product;
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the costs associated with the investment in the financial product to be borne by the investor;
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information about how and to whom an investor can make a complaint where there is a problem with the product or the person producing, advising on or selling the product.

‘ Comprehension alert’ for investment products that are difficult to understand

When an investment product is very difficult to understand, the provider has to ensure the KID contains the following warning: ‘You are about to purchase a product that is not simple and may be difficult to understand’.

Investment products covered

The rules apply to packaged retail and insurance-based investment products (also known as ‘PRIIPs’). These are a standard range of investment products typically offered by a bank to consumers, for example, in order to save for a specific objective such as a house purchase or for a child’s education.

They include investment funds, insurance-based investment products, retail-structured securities and structured-term deposits (structured products are investments with a pre-set formula for calculating returns and a pre-set formula for calculating risk).

Delegated Regulation (EU) 2017/653 supplements Regulation (EU) No 1286/2014. Its Annex I establishes a common template for the KID describing the purpose of the investment product to help investors understand the nature, risks, costs, potential gains and losses of the product and help them compare it with other products.

For example, the KID must provide the following.

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Standardised information on the type of the PRIIP, its investment objectives, how these will be achieved and the key features of aspects of the product such as the insurance cover.
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Information on the risks of a PRIIP in an aggregated form (as far as possible) and present it numerically as a single summary risk indicator with sufficient narrative explanations.
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Information on potential consequences of a PRIIP manufacturer not being able to pay out. The degree of protection of the retail investor in such cases under schemes (investment, insurance or deposit-guarantee) must be clearly set out.
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Clear information on recommended holding periods and required-minimum holding periods, and the possibility of partial or complete early exit in the event that the investor needs to disinvest.

FROM WHEN DOES THE REGULATION APPLY?

It applies from 1 January 2018.

BACKGROUND

For more information, see:

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

MAIN DOCUMENT

Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) (OJ L 352, 9.12.2014, pp. 1–23)

Successive amendments to Regulation (EU) No 1286/2014 have been incorporated into the original document. This consolidated version is of documentary value only.

Contents

1.

Summary of Legislation

2.

Legislative text