Key information about investment products

KEY POINTS

Key information for retail investors

• The manufacturer 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 three pages long and provide clear information on the product, allowing the investor to take an informed investment decision.
• KIDs should include the following information:
  • the name of the product and the identity of the manufacturer;
  • the types of investors for whom the financial product is intended;
  • the risk–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;
  • the costs to be borne by the investor associated with the investment in the financial product;
  • 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 or financial advisers to consumers, for example in order to save for a specific objective such as a house purchase or a child’s education.
• They include investment funds, insurance-based investment products, retail-structured securities, structured deposits and structured products.

European single access point (ESAP)

Amending Regulation (EU) 2023/2869 incorporates within Regulation (EU) No 1286/2014 a new article concerning the accessibility of information on the European single access point (ESAP), established under Regulation (EU) 2023/2859 – see summary. The ESAP will provide access to public financial and sustainability-related information about European Union (EU) companies and EU investment products. From 10 January 2028, when making public the KID under Regulation (EU) No 1286/2014, the amending act requires the PRIIPs manufacturer to submit that information at the same time to the relevant collection body for the purpose of making it accessible on the ESAP. The amending regulation also sets out the conditions (in the context of the digitalisation of the information) with which the KID must comply.

Delegated acts

• Delegated Regulation (EU) 2017/653, as amended by Delegated Regulation (EU) 2021/2268, 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 (entry/exit, ongoing and incidental costs) and potential gains and losses of the product, and help them compare it with other products.
• The KID must provide information such as:
  • the name of the product and manufacturer, the type of PRIIP, its investment objectives and the intended retail investor;
  • risk and return – a risk indicator including the risk–reward profile, a summary risk indicator, summary-risk-indicator-related narratives, including on possible maximum loss, and performance scenario templates and narratives;
  • what happens if a PRIIP manufacturer is unable to pay out (information about the guarantee/compensation scheme, the risks covered and those not covered);
  • the costs over time and the composition of costs;
  • the recommended holding period and information about disinvesting before maturity and applicable fees/penalties, if appropriate;
  • how a retail investor can lodge a complaint.
• Other aspects are addressed in subsequent annexes:
  • Annex II – methodology for presenting risk;
  • Annex III – presentation of the summary risk indicator;
  • Annex IV – performance scenarios;
  • Annex V – methodology for presenting performance scenarios;
  • Annex VI – methodology for calculating costs;
  • Annex VII – presentation of costs.