The EU Regulation for Packaged Retail and Insurance-based Investment Products (PRIIPs) aims to enhance investor protection by introducing the Key Information Document (KID), a new type of investor information document designed to enable investors to compare investment products easily even if they are of different types.
All alternative investment funds are covered by the regulation if they are sold to a retail investor as defined in MiFID II - that is, every investor not qualifying as a professional investor OR not having opted to be treated as a professional. This means the investment vehicles that may be subject to the PRIIPs Regulation include funds subject to Part II of Luxembourg's fund legislation, SIFs, SICARs, RAIFs and other types of non-UCITS fund.
Since January 1, 2018, a KID is required for each subscription to an investment by a family office, high-net-worth individual or even ultra-high-net-worth individual, since the latter are considered retail investors unless they choose to be classified otherwise.
UCITS funds that already have a Key Investor Information Document must adapt the KIID to comply with the PRIIPs KID disclosure requirements by December 31, 2019 at the latest. While the UCITS KIID inspired the PRIIPs KID and they share common characteristics, the two documents address similar topics in a different way, including target market, performance scenarios, risk calculation methodology and cost disclosure.
The KID is a short document of a maximum size of three sides of A4 paper. It should include:
Before creating a KID, the provider of an investment product should consider whether they know the nature of their distribution network, the number of KIDs they will have to produce and maintain, whether they posses the necessary data and infrastructure to do so, and who will be in charge of the production of KIDs.
They need to classify their products, determine where data will come from, and, if necessary, draw up and develop new processes, which may require new data points and calculations. The impact of creating a KID in terms of cost and time should not be underestimated.
2. Design of the operating model
Uniquely in Luxembourg, Arendt's approach combines legal advice and regulatory and compliance services to meet the growing need of our clients for comprehensive support provided in the most efficient manner.
Please click on the document below to download our PRIIPs KID brochure.