Update November 2016: PRIIP timeline changes
The European Commission has announced that it will move to formally postpone the PRIIPs regulation for 12 months. This decision gives companies an extra year to prepare for a highly complex regulation. The new date when PRIIPs comes into effect is 31 December 2017.
The new requirements for PRIIPs (packaged retail and insurance-based investment products) mark the latest chapter in the EU’s drive to boost transparency in the investment industry and protect investors. Most notably, there will be a new key information document (KID) for PRIIPs, similar to the existing UCITS KIID. Issuers and distributors of PRIIPs have a vast undertaking on their hands, and now is the time to start preparing for the changes ahead.
Will it affect me?
The PRIIP umbrella covers a diverse range of investment products. They essentially include any form of packaged investment with more than one end-product that entails investment risk. Even within the investment fund sphere, the scope is wider than for UCITS, encompassing alternative investment funds (AIFs), for example. But the regime also covers insurance products (e.g. unit-linked and with-profits policies), along with structured deposits and securities. While pensions, direct investments in shares and bonds, and deposits bearing only interest rate risk are outside its scope, this still means that very many new firms will be grappling with KID requirements in the near future.
What is the PRIIP KID?
The PRIIP KID is a concise, factual document of no more than three A4 pages. It sets out in a clear and consistent manner the key information on an investment product. It must be written in such a way that it can be easily understood by a novice retail investor. The document is designed to maximise comparability across different products and providers.
The document must follow a very tightly defined structure, with set headings, information and visual elements (a risk indicator and performance presentation). The nature of the investments, risks, costs and potential gains and losses must all be disclosed, using non-technical, jargon-free language. While these specifications in many ways mirror those of the UCITS KIID, the two documents are not identical – the breadth of investment products in the PRIIP universe meant that the UCITS requirements could not simply be carried across.
The document must be published in at least one official language of each country in which the product is marketed and must be regularly reviewed and updated
Product issuers are responsible for producing the KID, while it is up to distributors to actively provide it to investors before any investment advice is given or any sale is made. The document must be published in at least one official language of each country in which the product is marketed and must be regularly reviewed and updated – creating a huge burden of writing, translation and administration for investment firms.
What is the timetable?
The European directive and regulation establishing the PRIIP regime are already in force. They set out the information that must be contained in the KID and how it is to be presented. Following a public consultation, the European supervisory authorities (the EBA, EIOPA and ESMA) have now developed the detailed rules, known as the “regulatory technical standards”. These govern the content, calculation methodology and more. They have now been submitted to the European Commission for endorsement.
Firms will have to start providing KIDs to their prospective investors from the end of December 2016. The existing KIID regime for UCITS funds will remain in place until at least 31 December 2019.
How can CLS help?
At CLS, we are ideally placed to help you produce your KIDs. We combine specialist linguistic expertise in finance and investments with the capacity to manage major projects and directly transferable experience from UCITS KIIDs. We have a thorough understanding of plain language requirements and a large pool of translators who have been specifically trained in KID requirements.
Whether you are looking to outsource the whole end-to-end content creation process or just elements of it to a specialist provider, we can write content based on your existing product documentation, edit text to bring it in line with plain language requirements and translate into multiple languages.
It makes sense to talk to us at an early stage as you plan how you will write, translate and update your KIDs. We can help avoid any pitfalls and will draw on our experiences of the automated systems that many of our UCITS KIID clients use.
On the technology front, our proprietary software can connect directly to your content management systems for seamless, hassle-free cooperation. By systematically using translation memory software, we can ensure consistency across all of your KIDs and deliver savings over time, given the uniform, repetitive nature of these documents.