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PRIIPs - 6 months to go

PRIIPs - 6 months to go
  • United Kingdom
  • Financial services - Asset managers and funds


We have given an overview of the PRIIPs regime in our previous briefings.  This article consolidates this earlier information and addresses some of the more difficult issues in relation to scope, content and the provision of the KIID that will have a practical impact on firms’ implementation projects.


Packaged Retail Investment and Insurance Products, or ‘PRIIPs’, is a term which broadly covers financial products sold to retail investors which “repackage” an underlying investment.  A PRIIP may take a number of forms including investment funds, insurance-based investment products and structured banking products.

The firms that ‘manufacture’ PRIIPs and the financial intermediaries that sell PRIIPs to retail investors will be required to prepare and distribute standardised disclosure documents similar to the UCITS KIID.  This new, EU-wide disclosure standard, called the Key Investor Document (KID), must be provided to retail investors from 1 January 2018 (a delay from the original implementation date). 

For the background and legal status of the regime, including the policy statements and legislation referred to in this article, please see Legal status of the PRIIPs regime.

Although the regime only directly affects the manufacturers of PRIIPs (a concept explored in further detail below), the indirect impacts of the regime are far reaching.  Firms whose products are merely used in a PRIIP issued by a third party may still need to source data and disseminate data relating to their products and transactions in the underlying investments.  This is one of PRIIPs’ key challenges.


Please see What is a PRIIP? for the meaning of “PRIIP” and products explicitly excluded. 

Marginal cases

There has, however, been some discussion around products which are on the edges of the PRIIP definition and do not neatly fit within any exclusion.

In 2016, Eversheds Sutherland prepared an opinion with the Investment Association regarding the scope of PRIIPs in relation to ISAs.  We concluded that ISAs are not within the scope of the regime.  That view has now been formally confirmed by the Financial Conduct Authority in their Policy Statement (PS17/6).

The FCA also confirms that:

  • Investment Trust Savings Schemes are out of scope;  
  • account services are likely to be out of scope;  
  • debt securities and VCTs need to be assessed on a case-by-case basis; and  
  • Holloway Sickness Policies and similar insurance-based policies are likely to be in scope.

We understand that the European Commission will shortly publish non-binding guidelines to assist with the interpretation of PRIIPs requirements.  These are expected to clarify points such as territorial application, closed-books of business and PRIIPs offered for no consideration.

PRIIPs Manufacturers

The obligation to produce the KID rests with the “product manufacturer”, and they are the person who either originates the product or makes changes to an existing product that alter its risk profile or the costs associated with it.

For a UCITS, the UCITS Management Company or the fund itself (in the case of a self-managed fund) will be the manufacturer.  In the case of AIFs, it would be safe to conclude that the AIFM is the PRIIP’s manufacturer but it is equally possible that another entity would be best positioned as manufacturer.  Unlike MiFID II, only a single entity can be the manufacturer so firms will need to be able to justify their assessment.  

We understand that guidance from the Commission will confirm, to avoid any doubt, that merely listing a PRIIP on a secondary market does not automatically render the market maker as a manufacturer.

Manufacturers directly in scope

A manufacturer only needs to prepare a KID where an in-scope product is being sold to retail investors in the EU (non-EU sales and institutional-only business do not require the KID). Closed-books of business are out of scope since there will be no further sales to retail investors.

Whether a product is otherwise in scope can generally be determined by considering whether it falls within the broad definition of a PRIIP and then whether any of the exclusions (above) and transitional arrangements (below) apply.

Transitional provisions

Manufacturers and distributors of UCITS funds are specifically excluded from the requirement to prepare a KID until 31 December 2019 (unless this period is extended or the UCITS KIIDs are found to be equivalent to PRIIPs KIDs).  This also means that UCITS are unable to voluntarily adopt the PRIIPs KID earlier than this date.

This transitional provision also applies to any non-UCITS funds which are subject to the UCITS KIID requirement. In the UK, a NURS using a NURS KII (a UCITS KIID-equivalent standard) is an example of this. Presently, the NURS KII is available to firms with a modification by consent of COLL and COBS as an alternative to the simplified prospectus. From 1 January 2018, NURS manufacturers may opt to prepare a NURS KII or a PRIIPs KID (the simplified prospectus will be retired).    

Indirect impact on manufacturers

Largely as a result of the transitional arrangements, there are a number of manufacturers who will not immediately be in the scope of the requirement to prepare or distribute a KID from 1 January 2018. However, these manufacturers may still find themselves impacted by PRIIPs where their product is repackaged by a downstream manufacturer (for example, where a UCITS is repackaged as part of a unit-linked insurance product). 

It is highly likely that where a product is repackaged, the ultimate manufacturer will seek information about the underlying product – such as investment objectives, policies, exposures, costs, investment horizon, risk warnings etc. As a result, a template – known as the European PRIIPs Template (EPT) - has been developed by a European working group to facilitate the sharing of information about products used in the manufacture of PRIIPs. There is no legal obligation to share this data, or use this template, but this is likely to be a practical and commercial necessity.  Although the template exists, and in a standardised form, the mere need to present data in a PRIIPs-compatible manner may itself be a significant burden even if a firm does not have an obligation to prepare a KID.

Additionally, MiFID firms that distribute PRIIPs or include PRIIPs in a client’s portfolio will need to seek information about the PRIIPs costs and charges.  A MiFID II Q&A from ESMA suggests that this should be a PRIIPs-compliant calculation.  This may give PRIIPs manufacturers another commercial incentive to apply PRIIPs requirements.  Information that PRIIP manufacturers need to share with MiFID firms can be disseminated through the European MiFID Template (EMT) – an equivalent to the EPT.

Multi-option products

In scope product manufacturers have a choice in how they produce the KID where the same core product has a number of investment options for the investor. The manufacturer can choose either to produce a complete KID for each option or a single, generic KID and a supplemental document explaining the options (by way of either a series of tailored pages or a guide to the options).  Where the underlying options are themselves UCITS (e.g. in the context of insurance PRIIPs using UCITS as the investment element), it should be possible to use the UCITS KIID to present the option-specific information.   


The Framework Regulation included a few lines about PRIIPs whose objectives include environmental or social objectives (EOS PRIIPs).  These PRIIPs need to include a line in the KID explaining these targets. 

A consultation on EOS PRIIPs was published by the ESAs on 10 February 2017 and is now closed.  Although the resulting policy statement is yet to be published, the consultation seems to envisage a wider population of PRIIPs than the EOS label might immediately suggest.  For example, an asset manager might habitually apply environmental, social and governance screening across all investments (e.g. a blanket rule against investments in munitions, tobacco etc) and this might fall under “norms-based screening” or “ESG integration” as described in the consultation paper.  We do not expect firms to be required to use an EOS label, but this is a topic that should be monitored as it may require further disclosure in other documents such as the prospectus.

The form and content of the KID

The Framework Regulation more or less defines a skeleton structure for the KID, and is supplemented by the Content Regulation. This provides a relatively certain basis for the creation of the KID, although the Q&As should further assist with implementation.

The KID must be formed of a maximum of three sides of A4, remaining easy to read and using characters of a legible point size. It must also use clear and understandable language. The document will be standalone and must be separate from marketing materials, though it can use corporate branding and the product manufacturer’s (or its group’s) corporate colours.

The order and content of the document is heavily prescribed.

A template for the KID

The Content Regulation incorporates a “compulsory template”.  This was anticipated to be a very useful tool though in practice it does little more than set out the mandatory titles from the Regulation on a 2‑page layout. Although there is some clarity in the Content Regulation as to how rigidly the template must be followed (e.g. section order and titles are compulsory, page breaks are not), it has not been made clear which other attributes of the template are compulsory (e.g. layout, style and emphasised text).  

Providing KIDs to investors?

Although the KID can be provided after execution in certain circumstances, such as long-distance contracts, the KID is primarily a pre-contractual document.  It must generally be provided in “good time” before execution, meaning sufficiently early for the retail investor to read and consider the KID before being bound by a contract. What this will mean in practice will depend on the retail investor in question – taking into account their knowledge and experience, the complexity of the PRIIP and the urgency for the investor to conclude the purchase, for instance.

PRIIPs is more generous than its UCITS forebear when it comes to ‘providing’ the disclosure document but it remains the case that investors must always be offered a paper copy of the PRIIPs KID.  In most cases an investor can also be provided with a copy of the KID in another ‘durable medium’ which, in 2017, is a fairly outmoded concept (encompassing documents contained on CD ROM or memory stick or sent by email to the investor’s email address). 

Before a PRIIP can be sold to retail investors, its PRIIPs KID must be published to the product manufacturer’s website.  However, simply making the PRIIPs KID available on a website may not of itself satisfy the requirement to ‘provide’ a KID (noting that a website will not usually be a durable medium).  However, the KID can be provided by means of a website where the specific conditions are met.

Updating the KID

KIDs must be reviewed at least annually but ad hoc reviews will be required where there are changes made to the PRIIP that might affect information in the KID.

Following a review, the KID must be revised if it is no longer accurate, fair or clear, not misleading or otherwise not compliant with the Framework Regulation.

Any revision triggers an update to all of the information in the document, and the revised document must be published without undue delay on the product manufacturer’s website.

What do I need to do now?

Despite its long lead time, much of the PRIIPs legislation and guidance has been hastily drafted and there are aspects which are confusing and difficult to interpret.  Any firms that didn’t examine the Annexes to the Content Regulation should now review this carefully – this deals with the controversial costs and performance disclosure methodologies and, among other things, firms may need to categorise PRIIPs in various ways with various consequences.  We have helped a number of firms navigate these difficult to understand aspects of the regulations. 

There are a number of aspects firms should now be considering:

  • Planning and scoping. If not already done, firms should carry out scoping exercises to determine which products will be affected by the PRIIPs regime and the interaction with UCITS KIID and NURS-KII disclosures.  For in-scope PRIIPs, firms should consider how to categorise their PRIIPs in accordance with the Annexes to the Content Regulation. 
  • Data. One of the most important tasks that firms should be carrying out is exploring the data requirements for the PRIIPs KID and EPT and whether they and their service providers have access to the relevant data feeds.  Internal systems may need to be upgraded in order to be able to process the data. 
  • Documentation. For firms who need to produce a PRIIPs KID, it is important to consider the template disclosure early.  This is not a marketing document and firms should not assume that templates provided by marketing teams or third party automation firms are compliant. 
  • Easy to understand? A lesson well learned from the UCITS KIID experience is that translation of existing content into readily-digestible, condensed paragraphs is a time consuming process.  This is relevant for firms producing KIDs but also firms who need to populate the EPT.  Eversheds Sutherland has a lot of experience with this and can assist.  
  • Translation. Where KIDs are to be used for overseas sales, consider the lead time for foreign language translation.

*Further information*

Legal status of the regime

The regime is implemented by way of a primary regulation (Framework Regulation) which was published in December 2014 and sets out the scope, framework and timetable for the regime.  The Framework Regulation is supplemented by secondary regulations covering: (a) the presentation, content review and revision of KIDs (Content Regulation); and (b) PRIIPs with environmental and social objectives (EOS KID Regulation) although this has not yet been published.

The use of European regulations is significant, as these directly address and bind EU citizens, businesses and Member States. This reduces the risk of regulatory arbitrage and is intended to ensure a high level of uniformity in implementation. 

The chief authors of the regulations have been the European Supervisory Agencies (ESAs) for banking (EBA), insurance (EIOPA) and markets (ESMA) who will also be publishing Level 3 guidance which will help firms and supervisory authorities to interpret the regulations.  This guidance is expected imminently at the time of writing.

Within the UK, the FCA has consulted on PRIIPs (CP16/18) and issued a policy statement (PS17/6)

What is a PRIIP?

"PRIIP" is actually a two-in-one definition incorporating packaged retail investment products and insurance-based investment products. Its two components are themselves separately defined in the Regulation:

"packaged retail investment product" means “an investment, including instruments issued by SPVs... where, regardless of the legal form of the investment, the amount repayable to the investor is subject to fluctuations because of exposure to reference values or to the performance of one or more assets which are not directly purchased by the investor”

"insurance-based investment product" means “an insurance product which offers a maturity or surrender value and where that maturity or surrender value is wholly or partially exposed, directly or indirectly, to market fluctuations”.

There are a number of products explicitly excluded from these definitions. In summary these include:

  • non-life insurance products  
  • pure protection products (with no surrender value)  
  • (non-structured) deposits  
  • vanilla shares  
  • government bonds  
  • pensions products recognised by Member States as retirement vehicles.

The following products are likely to fall within the definition of a PRIIP:

  • collective investment schemes – both AIFs and UCITS (though see below regarding transitional provisions)  
  • life insurance-based investment products  
  • market-exposed, structured securities  
  • market-exposed, structured term deposits  
  • derivatives  
  • certain corporate bonds

What does a PRIIPs KID need to include?

Section of the PRIIPs KID

What will be included


The label “Key Information Document” must appear at the top of the first page.

Explanatory statement

A prescribed statement setting out the purpose of the document is to be included.

Product manufacturer information


The product (and its International Securities Identification Number (ISIN) or other identifiers), information on the product manufacturer, its contact details (including a website and telephone number) and its regulatory authorisations. The date that the document is published or revised should also be included.

Comprehension alert

If the product might be difficult to understand, a comprehension alert must be included. This states that the investor is about to purchase a product that is not simple and may be difficult to understand.  This alert is required where the product would be a complex product under the MiFID II or IDD tests. 

What is this product?

What the product is, its objectives, its typical investor profile, how its rate is calculated and return.  This will include a disclosure of social and environmental targets for EOS PRIIPs.

What are the risks and what could I get in return?

This will incorporate a summary risk indictor (SRI), a diagram that combines market risk and credit risk on a 1-7 scale. The methodology to determine the SRI varies from product to product.

Risk factors not captured by the SRI have to be explained in words (including liquidity risk) and there are a number of mandatory disclosures depending on attributes of the product.

Manufacturers also have to detail “performance scenarios” - these are performance projections based on an investment of ten thousand euros over the PRIIP’s minimum recommended holding period as well as up to two shorter durations. The scenarios are to cover “unfavourable”, “favourable” and “moderate” scenarios on the basis of a formula together with a further downside-only, stress scenario and (for insurance products) a scenario to cover insured events.  

What happens if [name of the PRIIP manufacturer] is unable to pay out?

Description of whether the investment is covered by a compensation scheme and, if it is, details about the scheme, including the name of the guarantor/scheme and which risks are covered/excluded. 

What are the costs?

A summary of costs including ongoing and one-off costs, including the compound effect of these. These are presented in two costs disclosures tables.

  • The first sets out costs in monetary terms, aggregates them and then states a reduction in yield figure based on some assumptions.
  • The second sets out costs in percentage terms in a format that is similar in presentation to the UCITS KIID.

The methodology for calculating the costs is controversial and can lead to anomalies such as negative ‘costs’.  In many cases there is insufficient market data available to make the calculations.  This is a key concern and risk for manufacturers.

How long should I hold it and can I take money out early?

The minimum recommended holding period and the consequences of cashing in early.  The minimum recommended holding period is extremely prominent in the KID and this is just one a several times it is mentioned - it forms the basis of performance and costs disclosures for example.

How can I complain?

Practical information on making complaints.  UK houses may be able to repurpose existing COBS disclosures for this with some enhancements.

Other relevant information

Despite the broad heading, this only includes information on additional documents that are available to the investor (either pre-contract or post-contract).