MEPs extended the deadline by which investment companies must present a key information document to retail investors before they are offered a financial product.
Investment companies are obliged to produce a key information document (KID) to provide consumers with information about the features, risks and costs of an investment product. Before signing a contract, all small (non-professional) investors should be given a standard format KID to be able to understand and compare packaged retail and insurance-based investment products (PRIIPs), estimate the total cost of their investment as well as be aware of its risk-reward profile.
EU-regulated undertakings for collective investments in transferable securities (UCITS), which gather assets from small investors and pool them to buy bonds, shares or other financial products, also qualify as PRIIPs.
On Tuesday, MEPs extended the deadline for companies to provide a KID until 31 December 2022, in order to give them sufficient time to prepare.
Packaged retail and insurance-based investment products (PRIIPs): key information documents, extension of the transitional arrangement – the text was adopted with 608 votes to 29 and 51 abstentions.
Undertakings for collective investment in transferable securities (UCITS): the use of key information documents – the text was adopted with 609 votes to 6 and 73 abstentions.
Additionally, MEPs noted that the key investor information and the KID, which is intended for retail investors, cover the same information. They stressed that retail investors in PRIIPS interested in acquiring units of UCITS, should not receive, from 1 January 2023, both documents for the same product.
Finally, MEPs underlined their concerns that terms such as a retail investor or the product scope have not been clearly defined. To this end, they expect an urgent report from the European Commission laying down proposals to address the existing limitations.
Jonás Fernández (S&D, ES), rapporteur, said: “The existing transitional arrangements for certain companies that offer package retail investments and insurance products (PRIIPs) have been extended until 31st December 2022 to avoid presenting investors with the same information twice. The information investors receive when buying these products should be complete, clear and comparable. Otherwise, the information provided to consumers would not be as clear as it should be, and could even be misleading. We are now working on a delegated regulation to clearly define the key information document (KID) to be presented to consumers”.