PRIIPs manufacturers that offer Multiple Investment Options (MOPs), such as insurance for example, will face a particular challenge to deliver their PRIIPs KID.
Last updated as at 20/12/16
The PRIIPS Regulation requires that all content is delivered for both the main product (wrapper) and each of the underlying investment options; therefore it is impractical for the product manufacturer to include all the required content in a single three page document as prescribed under the Regulation. In acknowledging the difficulties the recently released RTS has provided product manufacturers with two distinct options to provide full pre-sale disclosure to its retail investors:
1. Combination PRIIPs KID.
2. Generic PRIIPs KID with:
2.1 PRIIPs KID for each of the underlying investment options or;
2.2 Supplementary Information Document with information on one or more underlying investment options.
1. Combination PRIIPs KID
This entails the publication of a single PRIIPs KID containing the information for both the main product and each of the underlying investment options.
For each underlying investment option, the product manufacturer will produce one single PRIIPs KID containing information on both the main product and the underlying investment option. Therefore, if there are one hundred underlying investment options available to choose from within the available range, then, at minimum, one hundred Combination KIDs will be required, one for each possible combination. A retail investor may likely only be interested in a limited number of underlying investment options, in such cases, only the underlying investment option chosen may be delivered to the retail investor, but the entire range of options must be readily available.
See chart below with what is expected for each combination PRIIPS KID.
2. Generic PRIIPs KID
In this option, at minimum two separate documents are being issued to the retail investor; the first one is a generic PRIIPs KID, containing summary information on the main product, as defined in the RTS; and the second document will be either a standalone PRIIPs KID for each underlying investment options or a supplementary information document with information on one or more underlying investment options.
The generic PRIIPs KID should contain the following information with regards to the main product:
- Product information, type of product, objectives, maturity and intended retail investor and information on where the retail investor can find the relevant information on the underlying investment options.
- Risk and Reward: indication of the level of risk options across the range of underlying investment options available and information on where the retail investor can find the relevant information on the underlying investment options.
- Costs: relevant to the main PRIIP and information on where the retail investor can find the relevant information on the underlying investment options
- What happens if the manufacturer is unable to pay out, holding period, how to complain and other relevant information.
2.1 Generic PRIIPs KID with standalone PRIIPs KID for each underlying investment option
A standalone will be issued as per required by legislation and provided to the retail investor.
2.2 Generic PRIIPs KID with supplementary information document for each individual investment option
The supplementary document or documents will disclose specific information regarding each underlying investment option available, the content required is:
- Comprehension alert, where relevant
- The investment objectives, the means for achieving them and the intended target market in accordance with the PRIIPS KID requirements
- A summary risk indicator and narrative, and performance scenarios in accordance with the PRIIPS KID requirements
- Costs in compliance with the PRIIPS KID requirements
The product manufacturer may decide to provide a booklet with information for each underlying option or may provide individual supplementary documents.
See chart below with what is expected for each generic PRIIPS KID.
- Irrespective of the approach selected the manufacturer is solely responsible for the production of the PRIIPs and cannot transfer that responsibility.
- The manufacturer will, in all likelihood, have to use information from third party providers such as the underlying investment option product manufacturers, in order to prepare the PRIIPs appropriately. This interaction will be key to the delivery of accurate and reliable PRIIPs documentation.