5th April 2014

KIDs to improve retail investment products transparency

The negotiators for the European Parliament and for the Council have struck a deal on 1 April on new rules concerning transparency of retail investment products (packaged retail and insurance-based investment products - PRIIPs). Non-professional investors will have to be informed on some essential information regarding the product in which they are going to invest. The information will have to be provided in the form of a KID – Key Information Document, a unified structured information form providing the investor with the information necessary in order to understand the product, to be able to compare it with other products, to estimate the total cost of the investment and its risks. If the product is extremely complicated, a warning will need to be on the KID. The KID will have to be objective, separate from any advertising materials, prepared by an identifiable entity that created the product and provided before a contract is signed with the investor. The new rules will apply to all retail investment products, except for non-life insurance investment products, life insurance products with the benefit payable after the death of the investor or compulsory state, private or employer-based retirement scheme investments. If a KID is misleading, the company that issued it will be punishable under national law. According to Michel Barnier, Commissioner for the internal market, these measures are necessary in order to ensure the small investors´ trust in the financial system. The informal deal has already been approved by the Economic and Monetary Affairs Committee of the European Parliament and by the Council´s COREPER. Formal adoption by the plenary and by the ministerial Council will follow shortly.

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Members of the American Chamber of Commerce in the Czech Republic