The European Commission has adopted a Delegated Regulation and Annexes supplementing Regulation (EU No 1286/2014 on key information documents (KIDs) for Packaged Retail and Insurance-based Investment Products (PRIIPs) (the PRIIPs Regulation), introducing regulatory technical standards (RTS) with regard to the presentation, content, review and revision of KIDs and the conditions for fulfilling the requirement to provide such documents to retail investors in good time. The RTS combines technical standards developed under Article 8(5), Article 10(2) and Article 13(5) of the PRIIPs Regulation and are designed to present the key features of an investment product in a consumerfriendly manner. In particular technical standards specifying the presentation and content of the KID will apply to the PRIIP manufacturer when drawing up the KID.

The Delegated Regulation is set out as follows:

  • Articles 1 to 8 address the different sections of the KID set out in Article 8(3) of the PRIIPs Regulation and the underlying methodologies necessary for obtaining and calculating information to be included in the KID such as the costs, rewards, returns, risks and objectives of the product;
  • Article 9 specifies the use of mandatory texts and a mandatory template detailing a standardised layout to which the KID must conform;
  • Articles 10 to 14 set out content requirements of a KID for PRIIPs offering a range of investment options where the respective information required could not be included in a single stand-alone KID;
  • Articles 15 and 16 set out requirements to review and revise the KID as required under Article 10 of the PRIIPs Regulation; and
  • Article 17 sets out timing obligations with regard to delivery of the KID to retail investors as required under Article 13 of the PRIIPs Regulation.

The Delegated Regulation has been submitted to the European Parliament and Council for consideration and if approved will enter into force 20 days following publication in the Official Journal of the European Union. It will apply from 31 December 2016.

In a separate development, in a letter to the Council and the Parliament, the European Supervisory Authorities (ESMA, EBA and EIOPA) announced their intention to jointly publish questions and answers (Q&As) in relation to the implementation of the RTS. It is envisaged that the Q&As will be published this summer and will relate among other things to the technical details of the calculation of actual transaction costs and the calculation of transaction costs for new PRIIPs, as well as the calculation of the market risk and credit risk measures for the different types of PRIIPs.


The HM Treasury has published a review of its transposition of the Recast Undertakings for Collective Investments in Transferable Securities (UCITS IV) Directive 2009/65/EC.

UCITS IV sought to correct the inefficiencies identified in the UCITS III framework through the following changes:

  • removing administrative barriers to the cross-border marketing of UCITS;
  • introducing a management company passport;
  • replacing the simplified prospectus with a key investor information document (KIID) to improve investor disclosure;
  • providing for `master-feeder' structures; and
  • improving supervisory cooperation.

The review notes that UCITS funds now have more than 8trn of assets under management and account for more than 70 per cent of the assets under management in Europe. Outside Europe, the UCITS framework has been successful in creating a global investment standard and structure based on European norms; UCITS have brought substantial flows of capital into European markets. More than 70 per cent of funds sold in Hong Kong, for example, are branded as UCITS and formed under this legislative framework.

The review highlights several areas in which the UCITS framework is not fulfilling its objectives to the degree initially hoped. For example, there are still several barriers to fund mergers and master feeder structures which have prevented the economies of scale in the UCITS market to be achieved.

The UCITS IV Directive remains in place, but it has since been amended by UCITS V which introduces provisions for:

  • UCITS depositaries to ensure minimum standards of safeguarding across the EU;
  • remuneration rules for fund managers to ensure risk taking is aligned with investor appetite; and
  • sanctions for contraventions of the Directive.


As part of its Quarterly Consultation No 13, the FCA has proposed a new definition of `pooled investment vehicles' for the purposes of the marketing restriction rules on non-mainstream pooled investments (NMPIs).

The FCA states that it has become aware of problems in the application of the rules to pooled investment special purpose vehicles (SPVs), whereby firms are able to circumvent consumer protection rules through the drafting of certain SPV structures.

The FCA argues that the current definition of SPVs within the context of the NMPI rules is too ambiguous and complex, and allows firms to circumvent consumer protection by omitting the `securitisation' of assets in the instrument of incorporation of a pooled investment SPV. Additionally, the existing definition requires that the SPV should be formed for a `sole purpose' concerning designated investments.

Proposed New Definitions

The FCA has proposed two new `pooled investment vehicle' definitions, which focus on the substance rather than the form of the arrangement. The FCA believes these would offer greater certainty to investors and fund managers alike, aligning with the regulatory framework for the marketing of collective investment schemes.

Option 1 is the preferred option. Under this definition, any body corporate would be a `pooled investment vehicle' if it:

  • met the definition of collective investment scheme in section 235 of the Financial Services and Markets Act 2000 (Collective Investment Scheme) Order 2001 (FSMA order);
  • did not fall within any other exclusion in the FSMA order;
  • did not have a general commercial or industrial purpose; and
  • was not an open-ended investment company.

Under this option, firms could continue to market `pooled investment vehicles' to certified high net worth investors and self-certified sophisticated investors. They could also apply under section 138A FSMA to the FCA to market such investments to ordinary retail investors if the marketing restriction is seen as unduly burdensome and would not impact upon the broader consumer protection aim.

Option 2 replicates the concept of a collective investment undertaking, which is already in common use under AIFMD.

The FCA proposes that the new definition will come into force three months after the date on which it is made by the FCA Board.