The Packaged Retail and Insurance-based Investment Products Regulation (PRIIPs)
The aim of the PRIIPs Regulation is to encourage efficient markets by helping investors to better understand and compare the key features, risk, rewards and costs of different packaged retail and insurance-based investment products (PRIIPs), through access to a short and consumer-friendly Key Information Document (KID).
The PRIIPs Regulation only applies to products that are defined as PRIIPs and only if the PRIIP is made available to retail investors.
Who is a retail investor for the purpose of the PRIIPs Regulation?
A retail investor is a “retail client” as defined in “MiFID II”. Under MiFID II, a retail client is any client that is not a professional client (a client who possesses the experience, knowledge and expertise to make its own investment decisions and properly assess the risks that it incurs in accordance with criteria set out in MiFID II – the precise definition is set out in an Annex to MiFID II).
A “retail client” also includes any customer of an insurance undertaking or re-insurance undertaking within the meaning of the EU Insurance Mediation Directive who would not qualify as a professional client under MiFID II. Following UK exit from EU – separate onshored version of PRIIPs in UK applies to retail investors in UK and EU version applies to investors in EU and at present the substance of both regulations are the same.
- investment products where the amounts repayable to the investor are subject to fluctuations from exposure to (i) reference values or to (ii) the performance of assets not directly purchased by the retail investor
- insurance-based investment products where the maturity or surrender value is exposed to market fluctuations.
Current PRIIPs may include FX and Interest Rate derivatives, amongst others, when sold to retail categorised clients.
Products obtained through Lloyds Bank plc that are not PRIIPs include, amongst others:
- deposits (other than structured deposits – a combination of a deposit and investment product)
- FX Spot transactions; and
- lending products.
There are ongoing reviews by the FCA on the UK PRIIPs rules and current requirements may be subject to change. We will notify you of any changes to the above by updating this webpage.
The KID is a stand-alone, standardised document prepared for each investment, at the product level, and whose form and content is governed by mandatory rules set out in the PRIIPs Regulation and its underlying rules & guidance. A KID can be up to a maximum of 3 sides of A4-sized paper and may refer to where detailed information can be found. Each KID contains generic disclosures for each different type of PRIIP, which is presented in a pre-determined sequence of sections. The sections are:
- What is this product?
- What are the risks and what could I get in return?
- What happens if [name of the PRIIP manufacturer] is unable to pay out?
- What are the costs?
- How long should I hold it and can I take money out early?
- How can I complain?
- Other relevant information
The “PRIIPs Regulation” (EU Regulation 1286/2014) in respect of packaged retail and insurance-based investment products (such products in scope of the PRIIPs Regulation, “PRIIPs”) is a new regulation applying from 1 January 2018 throughout Europe.
A “PRIIP” is defined in the PRIIPs Regulation as “an investment…where, regardless of the legal form of the investment, the amount repayable to a 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” (Article 4(1)).
For these purposes, a Retail Investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of the revised Markets in Financial Instruments Directive 2014/65/EU (“MiFID II”); or (ii) a customer within the meaning of Directive 2002/92/EC (as amended the "Insurance Mediation Directive"), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Directive 2003/71/EC (as amended, the "Prospectus Directive").
The regulation’s aim is to harmonise the information provided to Retail Investors that transact in investment products, such as (but not limited to) Foreign Exchange Forward Contracts, Interest Rate Swaps and Commodity Swaps. This is done through providing Retail Investors access to the so-called KID.
The KIDs are short, stand-alone, standardised documents whose form and content is governed by mandatory rules set out in the PRIIPs Regulation and its underlying rules & guidance. They are generic disclosures for each different type of PRIIP providing consumer-friendly, consistent and clear information to help Retail Investors to better understand and compare the key features, risk, rewards and costs of different PRIIPs provided by those selling them.