_As per Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for Packaged Retail and Insurance-based Investment Products (PRIIPs) (PRIIPs Regulation), all PRIIPs manufacturers must issue a PRIIPs Key Investor Document (KID) before retail investors may invest in the relevant PRIIP (including investment funds).
On 7 April 2017 and 30 May 2017, respectively, the Association of the Luxembourg Fund Industry (ALFI) issued its first and second Q&As on the PRIIPs KIDs (ALFI Q&A). On 6 July 2017, the Luxembourg supervisory authority—the Commission de Surveillance du Secteur Financier (CSSF)—issued the fourth version of its frequently asked questions on the laws and regulations governing undertakings for collective investment in transferable securities (UCITS) (UCITS FAQ) and the eleventh version of its frequently asked questions on Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers (AIFMD FAQ). Notably, although the CSSF and ALFI do not cover the same points, these guidelines are both consistent with and complementary to one another.
Clarifications and guidance on the issuance of PRIIPs KIDs that are based on the ALFI Q&A, UCITS FAQ and AIFMD FAQ are below.
Which funds are affected by the PRIIPs Regulation?
The PRIIPs Regulation will apply from 1 January 2018.
Undertakings for collective investment subject to Part II of the Luxembourg law of 17 December 2010 on undertakings for collective investment, as amended (Part II Funds), fall within the scope of the PRIIPs Regulation because they target retail investors.
However, undertakings for collective investment in transferable securities (UCITS) that were authorised pursuant to Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to UCITS, as amended, are exempt from the obligations under the PRIIPs Regulation until 31 December 2019. A UCITS will have to issue a PRIIPs KID as of 1 January 2020 unless the European Commission extends the deadline per the transitional arrangements’ review of the PRIIPs Regulation.
Specialised investment funds (SIFs), investment funds in risk capital (SICARs) and reserved alternative investment funds (RAIFs) are required to issue PRIIPs KIDs in case the conditions set out in the PRIIPs Regulation are met.
To which investors must a PRIIPs KID be provided?
‘Retail investors’ are generally assumed to be all investors who do not fall within the definition of ‘professional investors’ of the markets in financial instruments directive (MiFID).
To avoid any doubt, the definition of ‘professional investors’ includes retail investors who opt to be treated as professional investors.
As a reminder, only well-informed investors may invest in either a SIF, SICAR or RAIF. The definition of a ‘well-informed investor’ includes institutional investors, professional investors and other investors who meet certain criteria.
Consequently, certain well-informed investors may not qualify as professional investors and will therefore be classified as retail investors. Therefore, if either a SIF, SICAR or RAIF is available to well-informed investors who do not qualify as professional investors and are therefore retail investors for the purposes of the PRIIPs Regulation, a PRIIPs KID must be published.
PRIIPs KIDs are designed for retail investors only, and a PRIIPs KID does not need to be published for classes that are reserved for professional investors.
The CSSF also confirmed that the PRIIPs KID does not need to be provided to investors outside the European Economic Area (EEA), unless a non-EEA country requires it.
Disclosure in the offering document
The CSSF strongly recommends that Luxembourg alternative investment funds (such as SIFs, SICARs and RAIFs) that are offered and/or sold only to professional investors amend their offering documents to expressly note that they are offered and/or sold only to professional investors and that they will not issue a PRIIPs KID. As an alternative to such an amendment, such Luxembourg funds may complete, sign and mail the self-assessment form, which is available on the CSSF’s website, to the CSSF. This form serves as an assessment of the fund’s status regarding whether it is either offered or sold only to professional investors.
Unlaunched and closed classes
No PRIIPs KID is required for a retail share class that is mentioned in the prospectus yet unlaunched.
No PRIIPs KID is required for a share class that has been launched yet was closed to subscriptions in 2017.
A PRIIPs KID must be provided each time an investor makes a subscription in the same class, except for an investment made through a savings plan with a regular subscription.
UCITS KIID-like documents
Part II Funds may, per the aforementioned law of 2010, publish a UCITS key investor information-like document (UCITS KIID-like document). However, a Part II Fund is exempted from issuing a PRIIPs KID if the UCITS KIID-like document is published for each retail class before 1 January 2018 and if the relevant Part II Fund amends its prospectus before 1 January 2018 to include certain references to the UCITS KIID-like document.
The above exemption also applies to SIFs, SICARs and RAIFs whose shares are not reserved for professional investors, subject to compliance with the above requirements.
To avoid any doubt, any Part II Fund, SIF, SICAR or RAIF launched from 1 January 2018 must issue a PRIIPs KID. A new sub-fund of a Part II Fund, SIF, SICAR or RAIF launched before 1 January 2018 may benefit from the exemption if the Luxembourg fund in question had issued a UCITS KIID-like document prior to that date.
Notably, it is not possible to produce a PRIIPs KID for a representative share class unless a UCITS KIID-like document was produced before 1 January 2018.
Updated PRIIPs KIDs
A revised PRIIPs KID does not need to be sent to existing investors, even in the case of a material change to the fund. However, the most recent PRIIPs KID must be available on a website, as described below.
The PRIIPs KID may be made available on websites other than the fund’s if the fund includes links on its website to those external websites.
Filing of the PRIIPs KID with the CSSF
The CSSF has advised that it does not require receipt of drafts of the PRIIPs KID but rather only requires the final version thereof (or, if applicable, of the UCITS KIID-like document), as well as any updates. The CSSF took the same approach as it did with the UCITS KIID and confirmed that the PRIIPs KID will not be visa-stamped by the CSSF.