On 15 April 2014, the European Parliament voted in favour of the proposed regulation on key information documents (KIDs) for packaged retail and insurance based investment products (PRIIPs).

The new three page document will provide basic information about the relevant PRIIP, the risk and return expected as well as the overall aggregate cost that will arise in making an investment and will eventually replace the UCITS key investor information document (KIID) in addition to being introduced in respect of other investment products targeting retail investors.

At the inter-institutional agreement stage, some final amendments were made to the draft regulation including:

• The 5 year transitional period, available to UCITS to comply with the KID requirements under the draft regulation, will now also apply to non-UCITS funds where a member state applies the UCITS KIID rules to such non–UCITS funds.
• Certain PRIIPs, which have features that have led to mis-selling cases in the past, will have a complexity label known as a “Comprehension Alert” included in the KID, warning that “you are about to purchase a product that is not simple and may be difficult to understand”.
• The KID will constitute pre-contractual information and shall not contain cross-references to marketing material.

Next Steps

The draft regulation will need to be officially endorsed by each member state, it is expected that the introduction of KIDs for PRIIPS could be seen before the end of 2015.

Contributed by Michelle McGrath, James Phelan