Everything You Need to Know About Key Information Document

The KID or Key Information Documents are designed to help investors with the aim to facilitate retail investor’s understanding of the products being offered and support the comparison with other similar investment products more easily. The regulation is meant for every product manufacturer and distributor to provide their retail investors with a KID in order to strengthen investor protection, to better understand and compare the key features, costs and benefits of different retail products to ease the selection process and provide all the necessary information in a short and consumer friendly manner.

 

The KID is a pre-contractual information document that is provided to an EEA resident retail investor prior to the conclusion of any such transactions when purchasing a product covered by PRIIPs. To simply put, this regulation only applies to PRIIPs products and services by an EEA resident regardless of their nationality. Moreover, this regulation is applicable worldwide along with a term sheet, where a PRIIP is purchased, as long as it is purchased by an EEA retail investor.

 

What is the purpose of the Priips KID?

The purpose of the KID (Key Information Document) is to provide several key features or provide essential information to retail investors with respect to an investment product, it’s potential risks, it’s costs, and performance, thereby enabling to get a better understanding of the product and allowing them to make an informed investment decision. The investors will also be able to see and compare similar products on their risks, costs and performance.

PRIIPs require all investment companies to provide a KID or Key Information Document if they want to sell to retail investors. We have listed below some of the standard components that a PRIIPs contains for a KID. The KID must address:

• Name of the product
• Risks and what is the policy of return
• What happens when the manufacturer is unable to pay out?
• Costs involved or associated charges
• Any other related information
• Is there any possibility to take out money early?
• Historical performance

 

Earlier it was just a simple copy and paste of the full prospects, with poor design and lengthy full of technical terms. It can become an administrative burden with material variations across organizations as it is essential to make the KIDs user-friendly so that consumers understand your products clearly and the risks involved with it. A certified manager can help you cover all the compliance related to it with a certified KID. This single document will help you build trust among investors so it is important to make your documents user-friendly. It is also important that you know all the details and don’t mislead the investors with the information. It provides the retail investors with better disclosure about your product, easier to understand content and to easily facilitate any comparisons between products.

 

Is the KID subjected to any format restrictions?

As KID is intended to be a short document, it can be maximum of three sides of an A-4 size paper when printed. With this restriction in place, the regulation also states that it should be easy to read or written in a concise manner which promotes understanding and easy comparability with other products along with usage of characters of readable sizes. In a nutshell, the investment objective and the policies can not be simply copied and pasted from any documentation, unless it confirms to the rules and regulations of the KID. To avoid hassles in preparing a KID, the management company can hire an expert to pitch the content according to the guidelines so that the retail investors can also easily understand it when reading for the first time on a durable medium by the means of a website.