PRIIPs Key Investor Document (KID) Reporting Services

PRIIPs Key Investor Document (KID) Reporting Services

PRIIPs KID

As the regulatory environment is becoming increasingly more complex in the financial industry, it is important to have the proper mechanisms in place to navigate this rocky terrain and manage reporting, which is where Matterhorn Reporting Services adds value. Our knowledgeable consultants will lead you through the process of creating the mandatory PRIIPs KID documents. Our PRIIPS Key Investor Document (KID) factory with regulatory specialists can create and maintain your PRIIPs KIDs in most EU languages.

Our services cover :

  • Determination of the PRIIPs KID Summary Risk Indicator (SRI)
  • Determination of PRIIPs KID category
  • VAR calculation
  • VAR-Equivalent Volatility (VeV)
  • Market Risk Assessment (MRM)
  • Cost calculations
  • Pre-defined descriptions of risks and other document sections

 

Background PRIIPs Key Investor Document (KID)

The EU Regulation (EU) No 1286/2014 on key information documents for packaged retail and insurance-based investment products is also known as PRIIPs. It was approved by the European Parliament and the Council on 26 November 2014. The regulation is the first significant step in new investor protection legislation introduced by the EU in the wake of the 2008 financial crisis. The ESMA PRIIPS Key Investor Document (KID) regulation aims to increase the transparency and comparability of these investment products through the issue of a standardized short disclosure document, the PRIIPs Key Investor Document (KID). The PRIIPs KID is designed to give retail investors essential information about a PRIIP. Funds aiming solely at professional investors are not required to issue a KID document but are recommended to be explicit about that in their offering documents.

What are the goals of the PRIIPs regulation?

KIDs for PRIIPs is part of a drive by the European Union to increase transparency and efficiency in the retail investment market. The EU wants to help consumers (non-professionals) better understand the investments they are buying and make the retail investment market easier for consumers to navigate as a result.

What are KIDs for PRIIPs?

The Key Information Document (KID) is a 3-page document outlining the investment’s risks and costs. The essential information includes the main features of the product, the risks and reward profile and costs associated to the PRIIP.   Acting as a kind of quick reference guide to the PRIIP, KIDs must follow strict design and content guidelines, be produced in at least one official language of each country where the product is marketed and be regularly reviewed and updated.

Who produces a Key Investor Document (KID)

The regulation surrounding PRIIPS applies to all manufacturers and distributors or financial intermediaries who issue PRIIPs, which are invested in by retail clients. Retail advisors who sell these products to end consumers are obliged to ensure that their client receives the documents in the pre-sale phase. This rule applies even for execution-only online environments like mobile online banking application, where an advisor is not physically present.

Products that fall into scope:

  • Investment funds
  • Structured products
  • Insurance products
  • Life insurance products that hold an investment element
  • Derivative investments
  • Structured deposits.
  • When to report a Key Investor Document (KID)

 

Before the PRIIPs Key Investor Document is made available to retail investors, the PRIIPs KID must be published on the website of a PRIIPs manufacturer. The PRIIPs KID must be provided in a durable medium, which can be paper or a website (where certain conditions are met). In addition, retail investors need to be informed of their right to request a paper copy free of charge. The information contained with the PRIIPs KID must be kept up to date and those impacted by the regulation envisage frequent reviews of the document. If a change has been made to the PRIIPs KID, it will have to be redistributed to retail investors. Taking the reviewing and updating requirements into account, market participants have described the PRIIPs KID as a ‘live document’.

Differences between the PRIIPs KID and UCITS KIID documents

Starting January 1st 2020 UCITS Fund Manager are no longer exempted and are required to have more elaborate PRIIPs KID Document in place.

There are significant differences between the PRIIPs KID and UCITS KIID documents, requiring Fund Managers to start planning the conversion and start collecting the required data. The table below list the main difference:

SectionsPRIIPs KIDUCITS KIID
Document format7 sections

3 pages

5 sections

2 pages

Product InformationProduct description; type of PRIIP, objectives, type of retail investor, details of insurance benefits (if applicable) and termDescription of product’s objectives and investment policy
PerformanceFuture scenarioPast performance
Risk indicators & Performance calculationsFour PRIIPS categories to determine market risk

Market Risk Measure (MRM)

Credit Risk Measure (CRM)

Summary Risk Indicator (SRI)

Synthetic Risk and Reward Indicator (SRRI)
Manufacturer defaultClarification on financial loss due to the default of the manufacturer and guarantees if applicableN/A
Costs / charges / feesSummary cost indicator of the costs and its effect on the Yield, listing one-off costs, recurring costs and relevant incidental costsCharges including entry charges, exit charges, ongoing charges, performance fees
Holding periodRecommended holding period, disinvestment procedure and any related fees and/or penaltiesN/A
ComplaintComplaint procedure and contact informationN/A
Other relevant informationInformation on where and how other documents can be obtainedInformation on where and how to obtain further information about UCITS

 

Matterhorn assists both AIFMD and UCITS Fund Managers by creating the KID/KIID documents and calculating the required performance and risk indicators. If you would need assistance, please contact us!