In February 2008, the Committee of European Securities Regulators (CESR) published its advice to the European Commission on the content and form of the Key Information Document (KID). This new disclosure document is intended to simplify and highlight the crucial elements that a retail investor should consider when buying a UCITS. It is intended that the KID will eventually replace the simplified prospectus. In its advice CESR identified certain technical issues arising from its work that would require further consideration. These issues fell under three of the broad disclosure headings which make up the KID:  

  • Risk and reward.
  • Past performance.
  • Charges.
  • CESR has now published a Consultation Paper which identifies the options available for the KID in the areas of risk and reward, past performance or performance scenarios, and charges. It also provides a detailed description of the different policy options and describes their potential positive and negative effects. However, the Consultation Paper does not discuss issues relating to the costs of CESR’s proposals or asks specific questions about them.  

This is because the Commission intends to gather information on the likely costs of implementing the KID later this year.  

The areas covered by the Consultation Paper are:  

Risk and reward. CESR discusses the two options for risk and reward disclosure identified in the February 2008 advice, an improved version of the narrative approach versus a synthetic risk and reward indicator, while focusing on the development of a harmonised calculation methodology for the latter.  

Past performance or performance scenarios. The discussion on past performance is sub-divided into two categories:  

  • Disclosures for funds that have actual past performance data.
  • Disclosures for structured funds, for which by definition no meaningful past performance information can be displayed.
  • Charges. CESR’s proposals on charges cover several points relating to the overall presentation of charges disclosure, in particular the so-called ‘illustration of charges’ approach which uses cash figures instead of percentages.  
  • Other issues covered include performance fees, portfolio transaction costs and the handling of charges information for new funds (or where there has been a material change in the charging structure).
  • Comments on the Consultation Paper are invited by 15 May 2009.

View CESR launches a consultation on technical issues relating to KID disclosures for UCITS, 16 March 2009