The PRIIPs (Packaged Retail and Insurance-based Investment Products) Regulation aims to improve retail investor protection by:
- Providing basic pre-contractual information called KID (Key Information Document). The KID documents will provide you with key information on the investment product you may be interested in. It is not a Marketing material. This document will help you to better understand the nature, risks, costs and potential gains and losses of your chosen investment product.
- Improving the quality and comparability of information on the key features of investment and risk mitigating products (in particular on risk, performance and costs). The ability to better compare your selected investment products will increase your investor protection and make selections easier.
- The regulation also requires investment products to be explained in plain language, in order to allow the investor easier comparison between products.
The PRIIPs regulation has many similarities and overlaps with MiFID II but the big difference is that PRIIPs is specifically intended for retail investors (i.e. customers classified as non-professional customers under MiFID II). Furthermore, the regulation merely covers so called PRIIP-products.
A PRIIP is defined as an investment where the amount repayable to a retail investor is subject to fluctuations because of exposure to reference values or to the performance of one or more assets that are not directly purchased by the retail investor. Some of the following investment or risk mitigating products are included in the scope:
- Structured products
- Exchange traded products
- UCITS (delayed until 31 December 2019)
- Retail AIFs
- Insurance-based investment products
Under the regulation, manufacturers/issuers are obliged to produce a Key Information Document (KID) for each product in scope. The KID is a 3-page document which must be provided in the local language of the investor and be published on the company website prior to product being offered to retail investors. Any distributor or financial intermediary, who sells or provides advice about PRIIPs to a retail investor or receives a buy order on a PRIIP from a retail investor, must provide the investor with a KID.