Packaged Retail and Insurance-based Investment Products (PRIIPs)
The regulation lays down uniform European rules on format and content of a key information document (KID) for Packaged Retail and Insurance-based Investment Products that are offered to retail clients. PRIIPs relate to investment products with structured features i.e. the repayable amount is subject to an underlying reference value or the performance of asset(s) not directly held. Manufacturers and distributors of PRIIPs are in scope. The manufacturer has the obligation to prepare, publish and maintain a pre-contractual KID for each PRIIP, summarising the PRIIPs features, risks, performance scenarios and costs.
UCITS and AIFM's fall under the definition of a PRIIP as described above. They are however exempted from drafting a KID until 31 December 2019. From 2020 on, UCITS and AIFM's that (also) offer to retail clients will have to produce a KID.
Pension products do not fall under the scope of the Regulation. The European Commission will decide before 31 December 2018 whether or not the scope of the Regulation should be extended to include these products.
1Implementation / enforcement 10/2007 - 07/2012
2Discussion / consultation 07/2012 - 11/2014
3Implementation / enforcement 11/2014 - 01/2018
4In effect 01/2018 -
A broad range of sectors is impacted: investment management, banking, insurance, pension and (securitization) SPVs. Accurate application of PRIIIPs requires identifying the banking, insurance and investment management products in scope. The KID production, review and publication processes should then be established, based on the decision of an in-house or outsourced production process and clear segregation of responsibilities between the several departments involved. Finally, consistency of PRIIPs with other relevant regulations and consistency of KID information with other product documentation should be ensured.
The biggest challenges for PRIIP manufacturers lie in 1. obtaining the risk and return information for the PRIIP, 2. tracking material changes to KIDs (the KID needs to be reviewed on every material change) and 3. translating the KID in every language where the PRIIP is offered and keeping it updated (this could be a total of 23 languages).