How to get ready for Priips

Advisers in other EU jurisdictions should similarly acquaint themselves with their own National Competent Authorities scope specification as there is expected to be regional differences in interpretation of scope.

What about Nurs and Ucits, aren’t they exempt?

Nurs managers will have the choice of implementing a Ucits KIID or a Priips KID.

Ucits have derogation from production of Priips KIDs until January 2019. In January 2019, Ucits and Nurs will both move to producing Priips KIDs.

Which clients are in scope?

The Priips regulation only applies if the Priip product is made available to retail investors. The definition of retail investors is:

• Retail clients as defined by Mifid.
• Customers as referred to in the Insurance Mediation Directive, where they would not qualify as professional clients under Mifid.

It is important that advisers make themselves fully aware of the product and investor scope in order to correctly assess situations where provision of a KID to an investor is expected.

What are the responsibilities around the KID and its provision?

The entity or person advising or selling the Priip is responsible for the provision of the KID. Depending on the nature of the engagement this could be the manufacturer, the distributor, or advisory firm / adviser. 

Where the product provider is engaged directly with retail clients, the responsibility will be on the product provider itself to provide the KID.

For full discretionary portfolio management, it is sufficient to provide the KID to the discretionary manager.

Priips also gives the local national competent authorities the power to prohibit or restrict the promotion, distribution or sale of insurance-based investment products.

As with the Ucits KIIDs regime, the Priips KID must be provided to retail investors rather than simply being made available to the investor.

What if the retail investor initiates the transaction by means of distance communications?

In this case the KID may be provided after the conclusion of the transaction, as long as it is not possible to provide the KID in advance, and the retail investor formally consents to this.

In these situations the investor must be informed that it is not possible to provide the KID in advance, and that they have the option to delay investment until such time as they receive and digest the KID.

What is in the KID?

Priips requires that a KID is a stand-alone, standardised document prepared for each investment. A KID can be up to a maximum of three sides of A4-sized paper and may refer to other documents.

These could include a prospectus if the cross-reference is related to the information required to be included in the KID, or refer to where detailed information can be found.