The Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 regarding key information documents for packaged retail and insurance-based investment products or PRIIPs came into force on 1 January and is directly applicable in all countries of the European Union.

A PRIIP is defined as a packaged retail investment product or insurance-based investment product. Packaged retail investment products are investments where, regardless of their legal form, the amount repayable to the retail 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 retail investor. An insurance-based investment product is an insurance product which offers a maturity or surrender value that is wholly or partially exposed to market fluctuations, directly or indirectly.

A 'delegated act' is a piece of EU secondary legislation, akin to a statutory instrument in the UK that Parliament adds on to an existing Act. The following delegated acts and relevant documents have also been passed or issued by the relevant organs of the EU in respect of PRIIPs.

• The Commission Delegated Regulation (EU) 2017/653 of 8 March 2017 supplementing Regulation (EU) No 1286/2014, which lays down regulatory technical standards with regard to the presentation, content, review and revision of key information documents and the conditions for fulfilling the requirement to provide such documents.
• The European Commission's guidelines to do with the application of the regulation.
• Relevant questions, answers and flow diagrams published by the three European Supervisory Authorities to do with the risk-and-reward calculations for the implementation of the regulation and the delegated regulation.

How to draw up the KID and information for investors

The regulation calls on PRIIP manufacturers to draw up standardised, pre-determined key investor documents (KIDs) in accordance with rules that govern their format, content and provision to retail investors.

The regulation applies to PRIIP manufacturers and all who fall under their supervision who sell (or give advice about) PRIIPs. PRIIP manufacturers include managers of investment funds, insurance undertakings, credit institutions and investment firms. These entities must draw up a KID for each of the PRIIPs that they manufacture, as they are in the best position to know those products. They are also responsible for each KID's accuracy.

Each PRIIP manufacturer ought to draw up each KID before it or anyone else can sell it to retail investors. However, if nobody sells the product in question to retail investors, it should not be obliged to draw up a KID at all.

In order for retail investors to be able to make informed decisions about investments, people who sell or give advice about PRIIPs are required to hand KIDs over to the investors before any transaction takes place. These people include intermediaries and, as also happens, any PRIIP manufacturers who want to sell PRIIPs (or provide advice about them) directly to retail investors. This rule applies irrespective of where or how the transaction takes place. However, if the transaction is by means of "distance communication," i.e. not face-to-face, the KID may be provided immediately after the transaction is concluded as long as it is not possible to provide the KID in advance and with the consent of the retail investor.

UCITS and AIFs

Although the regulation defines undertakings for collective investment in transferable securities (UCITS) as investment products, the recently established KID requirements (issued in accordance with directive 2009/65/EC) give such UCITS a transitional period of five years after the entry into force of the regulation during which they are not to be subject to the regulation. After the expiry of that transitional period and in the absence of any extension of it, UCITS should then become subject to the regulation. This transitional period also applies to management companies or mancos, investment companies and people who sell units of non-UCITS funds when an EU country applies rules on the format and content of the KID, as laid down in articles 78-81 of directive 2009/65/EC, to such funds.

Cypriot open-ended Alternative Investment Funds or AIFs that market their units/shares to retail investors have an obligation to draw up key investor information documents or KIIDs in accordance with article 36(3)(c) Alternative Investment Funds Law 2018, while open-ended AIFs that market their units/shares to well-informed investors, closed-ended AIFs that market their units/shares to retail and well-informed investors and AIFs with Limited Numbers of Persons (AIFLNPs) that market their units/shares to well-informed investors are obliged to draw up KIDs in accordance with the regulation, since article 36 does not apply to them.

The KID should be drawn up in a standardised format which allows retail investors to compare different PRIIPs with one another, because the means and behaviour of consumers are such that the format, presentation and content of information must be carefully calibrated to make it easy to understand and use. The same order of items and headings for these items should occur on each document. The KID should be distinguishable and separate from any marketing communications.

The KID should contain short and concise information that will allow retail investors to make informed decisions about investments and compare different PRIIPs with each other. It should therefore only contain vital information, especially information that pertains to the nature and features of the product (the possibility of it losing capital, its associated costs, its risk profile, relevant information about its performance and other things). The delegated regulation sets out the standardised template and content of information that the KID should include.

The discretion that EU countries can exercise

Although EU regulations take effect as law in every EU country as soon as they are passed, the PRIIPs regulation allows each nation and its regulators (known as designated competent authorities) to decide upon certain operational matters. In Cyprus, for example, CySEC has decided the following.

• A PRIIP manufacturer or the person who sells a PRIIP need not notify CYSEC 'ex ante' (i.e. in anticipation) about PRIIPs to be marketed in Cyprus.
• The KID may be written in Greek and/or English.