PRIIPs (Packaged Retail and Insurance-based Investment Products)

What is the PRIIPs regulation?

The PRIIPs regulation (Packaged Retail and Insurance-based Investment Products), or in French, "Produits d’investissement packagés de détail et fondés sur l’assurance," is a European regulation aimed at improving the transparency of products offered to retail investors within the European Union and harmonizing pre-contractual information standards.

Under the PRIIPs regulation, a Key Information Document (KID Priips or DIC Priips in French) containing essential information about the investment product must be provided to any non-professional investor (as defined by the MiFID II Directive) before the conclusion of the contract or acceptance of the offer. This regulation also applies to savers benefiting from employee savings and retirement schemes. In practice, nothing changes for the saver, as the KID replaces the UCITS KIID.

This document, whose content and format are standardized, aims to enable investors to better understand and compare different investment vehicles and to identify the associated risks, costs, potential gains, and losses.

Which products are covered by the PRIIPs regulation?

This regulation concerns a very wide range of financial products, notably those products required to provide a Key Information Document (KID), and more specifically all "packaged" investment products based on insurance (PRIIPs in English), that is to say products that allow investment in assets (stocks, bonds, etc.) whose value fluctuates and which the investor does not purchase directly.

The following are therefore concerned:

• investment products for which the amount repayable to the investor is subject to fluctuations depending on reference values or the performance of one or more underlying assets;
• insurance products exposed to market fluctuations;
• packaged products (securitization vehicles, structured bonds, UCITS and AIFs, convertible bonds, derivatives, structured deposits, SPVs, etc.).

What is the effective date of the PRIIPs regulation?

This regulation came into effect in January 2018 with a transitional period for products that already had a KID. This exemption period for providing a PRIIPs KID ends on December 31, 2022. Consequently, from January 1, 2023, the format of key information documents changes: the new PRIIPs KID replaces the KID governed by Directive 2009/65/EC known as "UCITS".

What is the formalism of the PRIIPs KID?

The PRIIPs KID and the UCITS KIID present a number of differences:

• A standard format for the new PRIIPs KID: An A4 format over 3 pages within 8 standardized and mandatory sections.
  • General information
  • What does this product consist of?
  • What are the risks and what could it yield for me?
  • What happens if the management company is unable to make payments?
  • What will this investment cost me?
  • How long should I keep it, and can I withdraw money early?
  • How can I file a complaint?
  • Other relevant information
• The evolution of the risk profile calculation method: the risk scale (from 1 to 7) remains the same but the methodology is different. The synthetic risk and reward indicator (SRRI) is replaced by the synthetic risk indicator (SRI), which combines market risk and credit risk.This methodological difference may change the displayed risk level even if the fund's investment strategy has not evolved.
• The displayed performance: past performance is no longer presented but remains available on the account holders' websites. The expected productperformance is presented according to 4 scenarios (stress, unfavorable, intermediate, favorable) over different periods: after 1 year, at half of the recommended holding period if this is longer than 10 years, and at the end of this period.
• A detailed presentation of fees: costs over time (over the 2/3 previously mentioned time horizons) and the composition of costs (one-off and recurring costs).