(1)

Retail investors are increasingly offered a wide variety of different types of investment products when they consider making an investment. These products may provide specific investment solutions tailored to the needs of retail investors, but are frequently complex and difficult to understand. Existing disclosures to investors for such investment products are uncoordinated and often fail to aid retail investors compare between the different products, to understand their features , or to improve such investors' financial education . As a consequence, retail investors have often made investments with risks and costs that were not fully understood by those investors, and have thereby on occasion suffered unforeseen losses.

(2)

Improving provisions on transparency of investment products offered to retail investors is an important investor protection measure and a precondition for rebuilding confidence of retail investors in the financial market , in particular in the aftermath of the financial crisis . First steps in this direction have been already been taken at Union level through the development of the key investor information regime established in Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS).

(3)

Different rules that vary according to the industry that offers the investment products and national regulation in this area create an un-level playing field between different products and distribution channels, erecting additional barriers to a Single Market in financial services and products. Member States have already taken divergent and uncoordinated action to address shortcomings in investor protection measures and it is likely that this development would continue. Divergent approaches to investment product disclosures impede the development of a level playing field between different investment product manufacturers and those selling these products and thus distort competition. It would also create an uneven level of investor protection with the Union. Such divergences represent an obstacle to the establishment and smooth functioning of the Single Market. Consequently, the appropriate legal basis is Article 114 TFEU, as interpreted in accordance with the consistent case law of the Court of Justice of the European Union.

(4)

It is necessary to establish uniform rules at the level of the Union applying across all participants of the investment product market on transparency so as to prevent divergences and reduce costs and uncertainty for product providers and distributors . A Regulation is necessary to ensure that a common standard for key information documents is established in such a uniform fashion so as to be able to harmonise the format and the content of these documents. The directly applicable rules of a Regulation should ensure that all participants in the investment product market are subject to the same requirements. This should also ensure uniform disclosures by preventing divergent national requirements as a result of the transposition of a Directive. The use of a Regulation is also appropriate to ensure that all those selling investment products are subject to uniform requirements in relation to the provision of the key information document to retail investors.

(5)

Whilst improving investment product disclosures is essential in rebuilding the trust of retail investors in the financial markets, effectively regulated sales processes for these products are equally important. This Regulation is complementary to measures on distribution (including investment advice, investor protection measures and other sales services) in Directive 2004/39/EC of the European Parliament and the Council (4). It is also complementary to measures taken on the distribution of insurance product in Directive 2002/92/EC of the European Parliament and of the Council (5).

(6)

This Regulation should apply to all products and underlying investments regardless of their form or construction that are manufactured by the financial services industry to provide investment opportunities to retail investors, where the return offered to the investor is exposed to the performance of one or more assets or reference values ▌. This should include investment products such as investment funds and life insurance policies and the investments underlying those investment funds and life insurance policies , and retail ▌products including assets that are held directly, such as sovereign bonds or shares that are offered to the public or admitted to trading on a regulated market situated or operating within a Member State. Retail packaged structured products intercede between the investor and the markets through a process of ‘packaging’, wrapping or bundling together assets so as to create different exposures, provide different product features, or achieve different cost structures as compared with a direct holding. Such ‘packaging’ can allow retail investors to engage in investment strategies that would otherwise be inaccessible or impractical, but can also require additional information to be made available, in particular to enable comparisons between different ways of packaging investments and to ensure that retail investors are able to understand the key features and risks of retail investment products .

(6a)

This Regulation should also apply to shares or units of special purpose vehicles and holding companies which an investment product manufacturer may devise with a view to circumventing this Regulation.

(6b)

Packaged investment products should provide clear benefits for retail investors, such as spreading investment risks to many different economic sectors or many underlying assets. However, packaging techniques can also be used to create features of investment products, which aim at misleading consumers, when they make their investment decision. Certain products with ‘teaser rates’ play on behavioural biases of retail investors, in this case on their preference for immediate attractive returns. The use of product names implying greater safety than is possible plays on the behavioural biases of consumers in a comparable way, addressing their aversion to risk. Consequently, such packaging techniques create a risk that the investor will focus strongly on immediate financial benefits without fully realising the related future risks. This Regulation should aim at avoiding packaging features which exploit biases in the decision making of investors, in order to promote transparency and a better understanding of risks linked to packaged retail investment products.

(7)

Insurance products that do not offer investment opportunities ▌ should ▌be excluded from the scope of the Regulation. ▌Since the focus of this Regulation is on improving the comparability and comprehensibility of information about investment products being marketed to retail investors, ▌occupational pension products and individual pension products should be excluded from the scope of this Regulation, provided that a financial contribution from the employer is required by national law and provided that the employer or the employee has no choice as to the pension product provider. Investment funds dedicated to institutional investors are not within the scope of this Regulation either since they are not for sale to retail investors. However, investment products with the purpose of accumulating savings for individual pensions should remain in scope because they often compete with the other products under this Regulation and are distributed in a similar way to the retail investor.

(8)

In order to provide clarity on the relationship between the obligations established by this Regulation and obligations established by Directive 2003/71/EC of the European Parliament and the Council (6) and by Directive 2009/138/EC of the European Parliament and of the Council (7), it is necessary to establish that those Directives are complementary to this Regulation. In particular, the key information document should incorporate the summary that provides key information as referred to in Article 5(2) in Directive 2003/71/EC following a review of this Regulation.

(8a)

Investment product manufacturers should ensure that the investment product they structure is compatible with the profile of the targeted retail investors. They should therefore set up a prior product approval process to ensure that their investment products do not expose retail investors to underlying assets the risk and reward profile of which is not easily understandable.

(8b)

The competent authorities and the European supervisory authorities (ESAs) should be provided, upon request, with all necessary information to verify the contents of the key information documents, to assess compliance with this Regulation and to ensure the protection of clients and investors in financial markets. The powers of the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) should be aligned in a consistent manner with those of the European Securities and Markets Authority (ESMA) under Directive of the European Parliament and of the Council on markets in financial instruments repealing Directive 2004/39/EC of the European Parliament and the Council [MIFIR].

(9)

Investment product manufacturers — such as fund managers, insurance undertakings, issuers of securities, credit institutions or investment firms — should draw up the key information document for the investment products they manufacture, as they are in the best position to know the product and are responsible for it. Investment product manufacturers should make the key information document available to the persons selling the investment product. The key information document should be drawn up by the investment product manufacturer , and the annex (including fees), by the person selling the investment product before the products can be sold to retail investors. However, where a product is not sold to retail investors, there is no necessity to draw up a key information document, and where it is impractical for the investment product manufacturer to draw up the key information document, this may be delegated to others. Where the drawing up of the key information document is delegated wholly or partially to third parties, the investment product manufacturer should retain general responsibility for its drawing up and content. In order to ensure widespread dissemination and availability of key information documents, this Regulation should allow for publication by the investment product manufacturer by means of a website of their choice.

(10)

To meet the needs of retail investors, it is necessary to ensure that information on investment products is accurate, fair, clear and not misleading for those investors. This Regulation should therefore lay down common standards for the drafting of the key information document, in order to ensure that it is understandable by retail investors. Given the difficulties many retail investors have in understanding specialist financial terminology, particular attention should be paid to the vocabulary and style of writing used in the document. Rules should also be laid down on the language in which it should be drawn up. The calculations of the costs that may arise should also be explained in an understandable manner. Furthermore, retail investors should be able to understand the key information document on its own without referring to other information. However, this should not preclude the use of cross-references within the key information document to other documents where additional information can be found that might be of interest to some retail investors.

(11)

Retail investors should be provided with the information necessary for them to take an informed investment decision and compare different investment products, but unless the information is short and concise there is a risk they will not use it. The key information document should therefore ▌ contain only key information, notably as regards the nature and features of the product, including whether it is possible to lose capital, the costs, ▌ and the risk reward profile, in the form of a summary indicator, of the product, and its underlying investment, as well as relevant performance information, and certain other specific information which may be necessary for understanding the features of individual types of products, including those intended to be used for retirement planning. The Commission should consider the opportunity for the European public credit rating agency referred to in the Position of the European Parliament adopted at first reading on 16 January 2013 with a view to the adoption of Regulation (EU) No …/2013 of the European Parliament and of the Council amending Regulation (EC) No 1060/2009 on credit rating agencies  (8) to provide key information on the risk profile related to sovereign bonds issued by Member States.

(11a)

Investors should be provided with a clear idea of what costs and fees will be incurred in their investment, not only at the point of transaction, but over a period of investment. Fees should be fully disclosed in compound, cumulative terms, as well as in monetary terms. Charges for advice should be calculated in a simpler way to make it easier for the investor to understand what it will cost them.

(11b)

EBA, EIOPA and ESMA should develop an online fund analyser which would allow investors to calculate the end value of their investment after fees and costs have been taken into account.

(12)

The key information document should be drawn up in a format which allows retail investors to compare different investment products, since consumer behaviours and capabilities are such that the format, presentation and content of information must be carefully designed and drafted to maximise engagement with the key information document and so to enhance financial education, understanding and the use of information. The same order of items and headings for these items should be followed for each document. In addition, the details of the information to be included in the key information document for different products and the presentation of this information should be further harmonised through delegated acts that take into account existing and on-going research on consumer behaviour, including results from testing the effectiveness of different ways of presenting information with consumers. In addition, some investment products give the retail investor a choice between multiple underlying investments and may have costs and charges that depend upon the customer's personal characteristics, such as their age or on their chosen investment amount . Those products should be taken into account when drawing up the format.

(12a)

A complexity label for complex products which appear to be unsuitable for retail investors should appear at the top of the key information document. This extra layer of transparency will help consumers make an informed decision about the level of risk they are taking and help avoid the mis-selling of products.

(13)

Increasingly retail investors are not only seeking financial returns with their investment decisions. Often they also pursue other purposes such as social or environmental goals. In addition, information about non-financial aspects of investments can be important for those seeking to make sustainable, long-term investments. However, information on social, environmental or governance outcomes being sought by the investment product manufacturer can be difficult to compare or may be absent. Therefore, it is desirable to further harmonise the details of the information on whether environmental, social or governance issues have been taken into account, and if so in what ways.

(14)

The key information document should be clearly distinguishable and separated from any marketing communications. Its significance should not be diminished by those other documents. The retail investor should confirm receipt.

(15)

In order to ensure that the key information document contains reliable information, this Regulation should require investment product manufacturers and persons selling investment products to keep the key information document up to date. The entity providing or selling the key information document should also keep the information provided to the retail investment up to date. To this end, it is necessary that detailed rules relating to the conditions and frequency of the review of the information and the revision of the key information document and its annex are laid down in a delegated act to be adopted by the Commission. The key information document and all its updates should be communicated to the competent authority.

(16)

Key information documents are the foundation for investment decisions by retail investors. For this reason, investment product manufacturers and persons selling investment products have an important responsibility towards retail investors in ensuring that they comply with the rules of this Regulation. It is therefore important to ensure that retail investors who relied on a key investor document for their investment decision have an effective right of redress. It should also be ensured that all retail investors across the Union have the same right to seek compensation for damages they may suffer due to failures on the part of investment product manufacturers in complying with the requirements set out in this Regulation. Therefore, rules regarding the liability of the investment product manufacturers should be harmonised. Also, a harmonised approach to penalties should be introduced in order to ensure consistency. This Regulation should establish that the retail investor should be able to hold the product manufacturer liable for an infringement of this Regulation in case a loss is caused through the use of the key information document that was misleading, inaccurate or inconsistent with the prospectus or, where no prospectus is prepared, the terms and conditions of the product .

(17)

As retail investors in general do not have close insight as to the internal procedures of investment product manufacturers, ▌ the retail investor should not bear the burden of proof . The retail investor should indicate in what respect he considers that the key information document does not comply with the requirements of this Regulation. It should then be incumbent upon the product manufacturer to respond to the claim.

(18)

The civil liability of an investment product manufacturer which is not covered by this Regulation should be governed by the applicable national law determined by the relevant rules of International Private Law. The competent court to decide on a claim for civil liability brought by a retail investor should be determined by the relevant rules on International Jurisdiction.

(19)

So that the retail investor is able to take an informed investment decision, persons selling investment products should be required to provide the key information document in good time before any transaction is concluded. The investor should provide a signature, in writing or electronically, to demonstrate that they have received the key information document. This requirement should ▌apply irrespective of where or how the transaction takes place. Persons advising on or selling include both distributors and the investment product manufacturer themselves where they choose to advise on or selling the product directly to retail investors. This Regulation is without prejudice to the Directive 2002/65/EC of the European Parliament and the Council  (9) . Where possible, investors should be provided with a ‘cooling-off period’ during which they may decide to cancel the transaction.

(20)

Uniform rules should be laid down in order to give the person selling the investment product a certain choice with regard to the medium in which the key information document is provided to retail investors allowing for use of electronic communications where it is appropriate having regard to the circumstances of the transaction. However, the retail investor should be given the option to receive it on paper. In the interest of consumer access to information, the key information document should always be provided free of charge.

(21)

To ensure the trust of retail investors in investment products and in financial markets as a whole , requirements should be established for appropriate internal procedures which ensure that retail investors receive a substantive response from the investment product manufacturer to complaints.

(21a)

Although improving investment product disclosures is essential to rebuilding the trust of retail investors in the financial markets, product design rules are equally important to ensure effective retail investor protection. Imperfect advice from financial advisors, bias in decision-making and evidence that financial behaviour depends primarily on psychological attributes give rise to issues that need to be addressed through curbing complexity in the packaging of investment products.

(22)

Procedures for alternative dispute resolution allow for a quicker and less expensive settlement of disputes than the courts and lighten the burden on the court system. For that purpose investment product manufacturers and the persons selling investment products should be under an obligation to participate in those procedures initiated by retailed investors concerning the rights and obligations established by this Regulation, subject to certain safeguards in conformity with the principle of effective judicial protection. In particular, the procedures for alternative dispute resolution should not infringe the rights which the parties to such procedures have to bring legal proceedings before the courts. Directive 2013/11/EU of the European Parliament and of the Council  (10) should apply to disputes under this Regulation.

(23)

As the key information document should be produced for investment products by entities operating in the banking, insurance, securities and fund sectors of the financial markets, it is of utmost importance to ensure a smooth co-operation between the various authorities supervising investment product manufacturers so that they have a common approach to the application of this Regulation.

(23a)

The increase of powers and competences allocated to the Union and national supervisory authorities should be facilitated through sufficient staff resources and appropriate financial means.

(24)

In line with the Commission Communication of December 2010 on reinforcing sanctioning regimes in the financial sector and in order to ensure that the requirements set out in this Regulation are fulfilled, it is important that Member States take necessary steps to ensure that breaches of this Regulation are subject to appropriate administrative sanctions and measures. In order to ensure that sanctions have a dissuasive effect and to strengthen investors' protection by warning them about investment products marketed in breach of this Regulation, sanctions and measures should ▌be published ▌.

(25)

In order to fulfil the objectives of this Regulation, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission in respect of specifying details with regard to the presentation and the format of the key information document, on the content of the information to be included in the key information document, detailed requirements with regard to the timing for provision of the key information document as well as in relation to its revision and review. It is of particular importance that the Commission carry out appropriate consultations and consumer testing during its preparatory work. The Commission, when preparing and drawing up delegated acts, should ensure a simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and Council.

(26)

The Commission should adopt draft regulatory technical standards developed by ESMA, EBA and EIOPA according to Article 8 regarding the methodology underpinning the presentation of risk and reward and the calculation of costs and environmental social or governance criteria by the means of delegated acts pursuant to Article 290 of the Treaty on the Functioning of the European Union and in accordance with the respective Articles 10 to 14 of the Regulations (EU) No 1093/2010, 1094/2010 and 1095/2010 of the European Parliament and of the Council (11).

(27)

Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data governs the processing of personal data carried out in the Member States in the context of this Regulation and under the supervision of the competent authorities. Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on the protection of individuals with regard to the processing of personal data by the EU institutions and bodies and on the free movement of such data, governs the processing of personal data carried out by the ESAs pursuant to this Regulation and under the supervision of the European Data Protection Supervisor. Any processing of personal data carried out within the framework of this Regulation, such as the exchange or transmission of personal data by the competent authorities should be in accordance with Directive 95/46/EC and any exchange or transmission of information by the ESAs should be in accordance with Regulation (EC) No 45/2001.

(28)

While UCITS are investment products within the meaning of this Regulation, the recent establishment of the key investor information requirements under Directive 2009/65/EC means that it would be proportionate to provide to such UCITS a transitional period of 5 years after the entry into force of this Regulation during which time they would not be subject to this Regulation. Following this period they would become subject to this Regulation in the absence of any extension of this transitional period. The same exemption should also apply to non-UCITS funds when these are already required under national laws to establish a key investor information document according to the format and content defined in Articles 78 to 81 of Directive 2009/65/EC.

(29)

A review of this Regulation should be carried out four years after the entry into force of this Regulation in order to take account of market developments, such as the emergence of new types of investment products, as well as developments in other areas of Union law and the experiences of Member States. The review should assess whether the measures introduced have improved the average retail investors' protection and understanding of investment products , their financial education and the comparability of the products. It should also consider whether the transitional period applying to UCITS should be extended, or whether other options for the treatment of UCITS might be considered. On the basis of the review, the Commission should submit a report to the European Parliament and the Council accompanied, if appropriate, by legislative proposals.

(30)

In order to give investment product manufacturers and persons selling investment products sufficient time to prepare for the practical application of the requirements of this Regulation, the requirements of this Regulation should not become applicable until two years after the entry into force of this Regulation. This Regulation should not apply to transactions which have taken place in the past.

(31)

This Regulation respects fundamental rights and observes the principles recognised in particular by the Charter of the Fundamental Rights of the European Union.

(32)

Since the objective of this Regulation, namely to enhance retail investors' protection and improve their confidence in investment products and to address identified weaknesses , including where those products are sold cross-border, cannot be sufficiently achieved by the Member States acting independently of one another, ▌but can rather, by reason of its effects, be better achieved at Union level, the Union may adopt measures, in accordance with principle of subsidiarity as set out in Article 5 of the Treaty of the European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve that objective ,

(a)

insurance products which do not offer a surrender value ▌;

(b)

deposits other than structured deposits as defined in Article 4 of [MiFID] ;

(c)

securities referred to in points (b) to (g), (i) and (j) of Article 1(2) of Directive 2003/71/EC;

(d)

other securities which do not embed a derivative , with the exception of corporate bonds and instruments issued by special purpose vehicles ( SPVs );

(e)

officially recognised occupational pension schemes ▌and individual pension products for which a financial contribution from the employer is required by national law and where the employee has no choice as to the provider;

(f)

officially recognised social security schemes subject to national or Union law.

(a)

‘investment product’ means a product through which a person can make a financial investment , regardless of the legal form and regardless whether the amount repayable is fixed or variable, including where an investment product is obtained through the direct holding of financial instruments, vehicles or holdings ;

(b)

‘investment product manufacturer’ means:

(ba)

‘person selling investment products’ means a person advising, marketing, distributing or selling investment products to a retail investor, a distributor or a person acting as an intermediary for an investment by a retail investor;

(c)

‘retail investors’ means:

(d)

‘pension products’ means products which under national law are recognised as having the primary purpose of providing the retail investor an income in retirement, and which entitles the retail investor to certain benefits;

(e)

‘durable medium’ means a durable medium as defined in Article 2(m) of Directive 2009/65/EC;

(f)

‘competent authorities’ means the national authorities of Member States, legally empowered to supervise the investment product manufacturer or a person selling an investment product to a retail investor.

(a)

presented and laid out in a way that is easy to read, using characters of readable size;

(aa)

focused on the key information that retail investors need;

(b)

clearly expressed and written in language and a style that communicate in a way that facilitates the understanding of the information by the retail investors at whom it is targeted , in particular , in language that is clear, succinct and comprehensible.

▌

(a)

▌the name of the investment product and identity of the investment product manufacturer, and holder of legal liability for the document (name and address) ;

(b)

under a section titled ‘What is this investment?’, the nature and main features of the investment product, including

▌

(c)

under a section titled ‘What decisions do I have to make?’, information about the various decisions a retail investor must make, e.g. fund choice, term, size of premium, including what other benefits or benefit triggers are available;

▌

(d)

under a section titled ▌‘What are the risks and what might I get back in return ?’ having regard to the ▌ market evolution it targets:

(e)

under a section titled ‘What can happen with my investment? Are there backstops and what do they cost?’ a clear indication of whether loss of capital is possible

(ea)

under a sub-section entitled: ‘What happens if the investment product manufacturer or seller default?’, a brief description of the maximum loss for the retail investor and reference to whether the loss can be recovered by a retail investor compensation or guarantee scheme;

(eb)

under a section titled ‘What happens if/when I die?’, information about what happens to the money held by the product/funds and any additional death benefit;

(f)

under a section titled ‘What are the costs?’, the total costs associated with an investment in the investment product, comprising all direct and indirect costs to be borne by the investor, including summary indicators of these costs , including:

Information shall be provided on how to access the independent online fund calculator operated by the relevant ESA ;

(h)

under a section ‘Can I take money out?’:

(ha)

under a section titled ‘How will I know how my product is doing?’, a statement that the manufacturer will transparently inform the customer through a yearly document about the achievement of the investment product. This document shall contain an ex-post disclosure of the investment product's return in the past year. Furthermore, this ex-post return shall be compared to a different investment product with a comparable risk profile. If the customer owns several investment products of a certain manufacturer and covered by this regulation, the aforementioned disclosure and comparison shall by applied to the whole portfolio. Any cost affecting the yield of the investment product shall also be disclosed.

(hb)

under a section titled ‘How can I complain?’, information about how and to whom a client can make a complaint about the product and its administration;

(hc)

under a section titled ‘What are the other legal documents related to this product’, a brief description of documentation (including a prospectus, where relevant) and excluding any marketing material;

(hd)

at a section near the end of the document, a new heading entitled ‘Information about the product’, which states, where applicable, the product's:

(he)

name and contact details of the competent authority which regulates the product;

(hf)

under a section titled ‘Insurance benefits’, an indication if the investment product offers insurance benefits and if so, details of these insurance benefits, in accordance with Directive 2009/138/EC, save for Article 8(2) thereof. Where the contract gives a choice between several unit linked life insurances, it shall also include a summary table classifying these units in three categories, according to their riskiness.

(a)

an indication that national tax legislation of the investor's home Member State may have a significant impact on the expected and actual return of investment;

(b)

the costs related to the investment product when he is the intermediary, including the commissions, retrocessions or other benefits related to the transaction paid by the manufacturer or a third party, as provided for in Directive 2004/39/EC and in Directive 2002/39/EC  (12).

(a)

the methodology underpinning the presentation of risk and reward profiles as referred to in point (e) of paragraph 2 of this Article;

(b)

the calculation of costs , including the specification of summary indicators, as referred to in point (f) of paragraph 2 of this Article;

(ba)

the principles to be used for environmental, social or governance outcomes as referred to in paragraph 2(b)(iii);

(bb)

in relation to each of the questions referred to in this Article, the list of products to which they apply.

(a)

the risk-reward profile or the costs are presented in an overly complicated manner;

(b)

the product invests in underlying assets not commonly invested in by non-professional investors;

(c)

the risk-reward profile is conditional upon the simultaneous occurrence of two or more events linked to at least two different asset classes;

(d)

a number of different mechanisms are used to calculate the final return on the investment, creating a greater risk of misunderstanding on the part of the retail investor;

(e)

the investment return includes packaging features which take advantage of retail investors' behavioural biases, such as by offering a ‘teaser’ fixed rate followed by a much higher floating conditional rate, or an iterative formula;

(f)

the global exposure of the financial product, measured by its monthly value-at-risk calculated within a 99 % confidence interval at the time of trade, is above 20 %.

(a)

the conditions and the frequency for reviewing the information contained in the key information document;

(b)

the conditions under which information contained in the key information document must be revised, and under which it is obligatory or optional to republish and redistribute the revised key information document;

(c)

the specific conditions under which information contained in the key information document must be reviewed or the key information document revised where an investment product is made available to retail investors in a non-continuous manner;

(d)

the circumstances referring to the product itself or the market conditions in which retail investors are to be informed about a revised key information document for an investment product purchased by them.

(a)

the retail investor chooses to conclude the transaction using a means of distance communication;

(b)

the provision of the key information document in accordance with paragraph 1 is not possible; ▌

(ba)

the retail investor asks to receive the key information document straight after the conclusion of the transaction, rather than delaying the transaction in order to receive the document in advance . The person selling or advising on the investment product shall not offer this option before the retail investor requests it;

(c)

▌the person selling the investment product has informed the retail investor of this fact.

(a)

the conditions for fulfilling the requirement to provide the key information document in good time as laid down in paragraph 1;

(b)

the method and the time limit for the provision of the key information document in accordance with paragraph 2.

(a)

on paper;

(b)

using a durable medium other than paper, where the conditions laid down in paragraph 4 are met; or

(c)

by means of a website where the conditions laid down in paragraph 5 are met.

(a)

the use of the durable medium is appropriate in the context of the business conducted between the person advising on or selling an investment , or acting as an intermediary in its sale, product and the retail investor; and

(b)

the retail investor has been given the choice between information on paper and in the durable medium, and has chosen that other medium.

(a)

the provision of the key information document by means of a website is appropriate in the context of the business conducted between the person advising on or selling an investment product , or acting as an intermediary in its sale, and the retail investor;

(b)

the retail investor has consented to the provision of the key information document by means of a website;

(c)

the retail investor has been notified electronically of the address of the website, and the place on the website where the key information document can be accessed;

(d)

where the key information document has been revised in accordance with Article 10 the most recent version shall also be provided to the retail investor; on request of the retail investor, previous versions shall also be provided;

(e)

it is ensured that the key information document remains accessible on the website for such period of time as the retail investor may reasonably need to consult it.

(a)

the proposed action addresses a significant threat to retail investor protection or to the orderly functioning and integrity of financial markets or to the stability of the whole or part of the financial system in the Union;

(b)

regulatory requirements under Union legislation that are applicable to the relevant investment product, financial instrument or activity do not address the threat;

(c)

a competent authority or competent authorities have not taken action to address the threat or actions that have been taken do not adequately address the threat.

(a)

has a detrimental effect on the efficiency of financial markets or on retail investors that is disproportionate to the benefits of the action; nor

(b)

creates a risk of regulatory arbitrage.

(a)

the marketing, distribution or sale of investment products or financial instruments;

(b)

a type of financial activity or practice.

(a)

an investment product, a financial instrument or activity or practice gives rise to significant investor protection concerns or poses a serious threat to the orderly functioning and integrity of financial markets or the stability of whole or part of the financial system within one or more Member States, including through the marketing, distribution, remuneration or provision of inducements related to the investment product or financial instrument;

(b)

a derivative product has a detrimental effect on the price formation mechanism in the underlying market;

(c)

existing regulatory requirements under Union law applicable to the investment product, financial instrument or activity or practice do not sufficiently address the risks referred to in point (a) and the issue would not be better addressed by improved supervision or enforcement of existing requirements;

(d)

the action is proportionate taking into account the nature of the risks identified, the level of sophistication of retail investors or market participants concerned and the likely effect of the action on retail investors and market participants who may hold, use or benefit from the financial instrument or activity;

(e)

the competent authority has properly consulted competent authorities in other Member States that may be significantly affected by the action; and

(f)

the action does not have a discriminatory effect on services or activities provided from another Member State.

(a)

the financial instrument or activity or practice to which the proposed action relates;

(b)

the precise nature of the proposed prohibition or restriction and when it is intended to take effect; and

(c)

the evidence upon which it has based its decision and upon which is satisfied that each of the conditions in paragraph 6 are met.

1.

All fees referred to in Article 8(2)(c) shall be disclosed cumulatively. They shall not be reclassified as part of the investment when they appear in a lower layer of the investment.

2.

Investment advice charges shall not be based on flat percentage rates, unless prior agreement is obtained by the investor. If a flat percentage rate is agreed, the person selling the investment product shall provide full disclosure of what this will signify over the duration of the investment, or for a time period requested by the investor.

3.

The person selling the investment product, or advising the investor, shall provide the investor with a breakdown of the time spent working on that advice, and this shall be communicated in the form of minutes or hours, against which there shall be an hourly rate, unless a flat percentage rate has been agreed as referred to in paragraph 2.

(a)

a one-tailed confidence interval of 99 %;

(b)

a holding period equivalent to one month (20 business days); and

(c)

an effective observation period (history) of risk factors of at least three years (750 business days) unless a shorter observation period is justified by a significant increase in price volatility (e.g. due to extreme market conditions).

(a)

guidelines on risk measurement and the calculation of global exposure of the investment products sold to retail investors;

(b)

guidelines on financial indices.

(a)

include a number of mechanisms, events or asset classes creating a risk of misinterpretation;

(b)

be conditional upon the occurrence of events uncommon for retail investors, such as the level of regulatory capital of a financial institution; or

(c)

include packaging features playing on the behavioural biases of retail investors.

(a)

retail investors have an effective way of submitting a complaint against the investment product manufacturer and hence a redress procedure;

(b)

retail investors who have submitted a complaint in relation to the key information document or the annex to the key information document receive a substantive reply in a timely and proper manner ; and

(c)

effective redress procedures are also available to retail investors in the event of cross-border disputes, in particular where the investment product manufacturer is located in another Member State or in a third country .

(a)

the procedure results in decisions which may be binding for the investment product manufacturer and the person selling the investment product ;

(b)

the limitation period for bringing the dispute before a court is suspended for the duration of the procedure for alternative dispute resolution;

(c)

the period of prescription of the claim is suspended for the duration of the procedure;

(d)

the procedure is free of charge or available for a nominal fee , as specified in national legislation.

(a)

an order prohibiting the marketing of an investment product;

(b)

an order suspending the marketing of an investment product;

(c)

a warning, which is made public and which identifies the person responsible and the nature of the breach;

(d)

an order for the publication of a new version of a key information document;

(da)

in the case of a legal person, administrative fines of up to 10 % of the total annual turnover of that legal person in the preceding business year; where the legal person is a subsidiary of a parent undertaking, the relevant total annual turnover shall be the total annual turnover resulting from the consolidated account of the ultimate parent undertaking in the preceding business year;

(db)

in the case of a natural person, administrative fines of up to EUR 5 000 000, or in a Member States where the euro is not the official currency, the corresponding value in the national currency on … [the date of entry into force of this Regulation].

(a)

the gravity and the duration of the breach;

(b)

the degree of responsibility of the responsible natural or legal person;

(c)

the impact of the breach on retail investors' interests;

(d)

the cooperative behaviour of the natural or legal person responsible for the breach;

(e)

any previous breaches by the responsible natural or legal person;

(ea)

all measures taken by the responsible person to prevent any repetition of the breach in the future;

(eb)

any compensation provided to retail investors by the responsible person following the breach.