KIID & PRIIPs

Background

The Packaged Retail Investment and Insurance-based Products (“PRIIPs”) initiative has been designed to improve transparency by providing a Key Investor Information Document (“KIID”) for investment funds, insurance-based investment products and retail structured investment products.

  • The objective of the KIID is to provide EU retail investors with reader-friendly information about investment products with the aim of improving transparency in the investment market.
  • Products which fall within the KIID scope include investment funds, life insurance-based investment products, structured securities, term deposits and derivatives (when marketed and sold to retail investors).  UCITS are exempt from these requirements until 31st December 2019.

Why is it important for you?

Firms which are impacted by the legislation will be required to produce KIIDs for all scope products from 31 December 2016

Key Considerations

  • Although the content of the KIID is very rigid, the calculation of the new Summary Risk Indicator (“SRI”) and Performance Ratios requires sophisticated risk calculations;
  • The SRI needs to account for market and credit risk – and, where applicable, liquidity risk – at the product level. This poses a particular challenge for mutual funds and structured products;
  • There is also an increased focus on cost disclosure and cost calculation;
  • Many advisors are looking to minimise the impact on their existing operating model by outsourcing the production of the KIID to external specialists, such as XCAP;
  • External specialists such as XCAP typically use fund administration and custodial data to produce KIID reports that are distributed to clients and regulators via electronic and digital channels;
  • For those who look to manage the KIID production and distribution themselves, software solutions will be need to be vigorously evaluated and tested.

XCAP's PRIIPs Services 

There are several ways in which XCAP can support you in meeting the PRIIPs requirements: 

  • Decide the Model: Target Operating Model (“TOM”) design including business case and implementation road map, and evaluation of in-house and outsourced solutions. ‘TOM’ design would typically include a comprehensive analysis covering compliance, MiFID II and ESMA;
  • Complete Due Diligence: XCAP work with you, pre and post-implementation to ensure it is compliant to FCA expectations, including an assessment of the monitoring and oversight processes;
  • Implement the Solution: XCAP provides experienced consultants to support an efficient and lower-risk implementation of the chosen solution.

Based on the PRIIPs regulation, the Key Information Documents (KIIDs) should be updated at least once per year, unless there are material changes, in which case a more frequent approach is required.

Prior to the conclusion of any transactions, fund managers and advisors are required to provide an up-to-date version of their ‘KID’ for products marketed to retail customers.

XCAP's PRIIPs Solution can offer you:

  • Ongoing Due Diligence and global registrations (in the EU and EEA) under the passporting regime and national private placement regime (NPPR);
  • Ongoing fund governance (regulatory filings to maintain registration status);
  • Bespoke KIIDs production;
  • Advisory services on the correct use of input data;
  • Bespoke wording for key sections of the KIIDs;
  • Performance and regulatory monitoring against benchmarks.

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