The European Parliament issued on November 26th 2014 Regulation number 1286/2014 (the "Regulation") on key information documents ("KID") for packaged retail and insurance-based investment products ("PRIIPs").
The Regulation applies to all products regardless of their form that are manufactured to provide investment opportunities to retail investors where the amount repayable to the investor is subject to fluctuation because of exposure to reference values or subject to the performance of one or more assets which are not directly purchased by the investor.
"The Regulation sets out uniform rules on the form and information of the KID and on the provision of the KID to retail investors."
It sets out uniform rules on the form and information of the KID and on the provision of the KID to retail investors, in order to enable retail investors to understand and compare the key features and risks of the PRIIP. The KID shall be prepared and distributed by PRIIP manufacturers and shall fulfil certain requirements as to the format and content. The aim of the Regulation is to provide retail investors with sufficient and clear information of a similar nature in terms of both content and quality thus increasing competition in the market and transparency for investors.
The Regulation came into force on December 29th 2014 and its provisions will apply as of December 31st 2016 (the "Application Date").
UCITS and non-UCITS for which a document comparable to the UCITS KIID is produced are exempt from complying with the terms of the Regulation at least until December 31st 2019. Other non-UCITS that are sold to retail investors will have to produce a PRIIPs KID as from the Application Date. The European Commission will conduct a review by end of 2018, based on which it will decide whether the transitional arrangements for UCITS should be prolonged or whether the UCITS KIID should be replaced by or considered equivalent to the PRIIPs KID.
The Regulation entitles the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority (the "ESAs") to prepare Regulatory Technical Standards ("RTS") which will contain detailed rules. On November 17th 2014 the ESAs published a discussion paper as a preparatory step for the adoption of RTS. This discussion paper will be followed by a more technical discussion paper and two further consultations in 2015. In parallel, the Commission is launching a market survey. The final level 2 measures will apply from December 31st 2016.