Article 2
‘What is this product?’ section
1.
Information relating to the type of the PRIIP in the section entitled ‘What is this product?’ of the key information document shall describe its legal form.
2.
Information stating the objectives of the PRIIP and the means for achieving those objectives in the section entitled ‘What is this product?’ of the key information document shall be summarised in a brief, clear and easily understandable manner. That information shall identify the main factors upon which return depends, the underlying investment assets or reference values, and how the return is determined, as well as the relationship between the PRIIP's return and that of the underlying investment assets or reference values. That information shall reflect the relationship between the recommended holding period and the risk and reward profile of the PRIIP.
Where the number of assets or reference values referred to in the first subparagraph is such that specific references to all of them cannot be provided within a key information document, only the market segments or instrument types in respect of the underlying investment assets or reference values shall be identified.
2a.
Where the PRIIP takes the form of a UCITS or an AIF, the information in the section entitled ‘What is this product?’ of the key information document shall cover those essential features of a UCITS or AIF about which a retail investor shall be informed, even where those features do not form part of the description of objectives and investment policy in the prospectus of a UCITS as referred to in Article 68 of Directive 2009/65/EC or the description of the investment strategy and objectives of the AIF referred to in Article 23(1), point (a), of Directive 2011/61/EU, including:
(a)
the main categories of eligible financial instruments that are the object of investment;
(b)
the possibility that the retail investor may redeem units of UCITS or AIF on demand, qualifying that statement with an indication as to the frequency of dealing in units, or where applicable a statement that there is no possibility to redeem units on demand;
(c)
whether the UCITS or AIF has a particular target in relation to any industrial, geographic or other market sectors or specific classes of assets;
(d)
whether the UCITS or AIF allows for discretionary choices in regards to the particular investments that are to be made, and whether this approach includes or implies a reference to a benchmark and if so, which one;
(e)
whether dividend income is distributed or reinvested.
For the purposes of the first subparagraph, point (d), where a reference to a benchmark is implied, the degree of freedom available in relation to that benchmark shall be indicated, and where the UCITS or AIF has an index tracking objective, this shall be stated.
2b.
The information referred to in paragraph 2a shall include the following, where relevant:
(a)
where the UCITS or AIF invests in debt securities, an indication of whether those debt securities are issued by corporate bodies, governments or other entities, and, where applicable, any minimum rating requirements;
(b)
where the UCITS or AIF is a structured investment fund, an explanation in simple terms of all elements necessary for a correct understanding of the pay-off and the factors that are expected to determine performance, including references, where necessary, to the details on the algorithm and its workings which appear in the prospectus of the UCITS or the description of the investment strategy and objectives of the AIF;
(c)
where the choice of assets is guided by specific criteria, an explanation of those criteria, such as ‘growth’, ‘value’ or ‘high dividends’;
(d)
where specific asset management techniques are used, which may include hedging, arbitrage or leverage, an explanation in simple terms of the factors that are expected to determine the performance of the UCITS or AIF.
2c.
The information referred to in paragraphs 2a and 2b shall distinguish between the broad categories of investments as specified in paragraph 2a, points (a) and (c), and paragraph 2b, point (a), and the approach to those investments to be adopted by a UCITS management company or an AIFM as specified in paragraph 2a, point (d) and paragraph 2b, points (b), (c) and (d).
The section entitled ‘What is this product?’ of the key information document may contain other elements than those listed in paragraphs 2a and 2b, including the description of the UCITS or AIF’s investment strategy, where those elements are necessary to adequately describe the objectives and investment policy of the UCITS or AIF.
3.
The description of the type of retail investor to whom the PRIIP is intended to be marketed in the section entitled ‘What is this product?’ of the key information document shall include information on the target retail investors identified by the PRIIP manufacturer, in particular depending on the needs, characteristics and objectives of the type of client for whom the PRIIPs is compatible. This determination shall be based upon the ability of retail investors to bear investment loss and their investment horizon preferences, their theoretical knowledge of, and past experience with PRIIPs, the financial markets as well as the needs, characteristics and objectives of potential end clients.
4.
The details of insurance benefits in the section entitled ‘What is this product?’ of the key information document shall include in a general summary, namely, the key features of the insurance contract, a definition of each benefit included, with an explanatory statement indicating that the value of those benefits is shown in the section entitled ‘What are the risks and what I could get in return’ and information which reflects the typical biometric characteristics of the target retail investors, showing the overall premium, the biometric risk premium that forms part of that overall premium and either the impact of the biometric risk premium on the investment return at the end of the recommended holding period or the impact of the cost part of the biometric risk premium taken into account in the recurring costs of the ‘Costs over the time table’ calculated in accordance with Annex VII. Where the premium is paid in the form of a single lump sum, the details shall include the amount invested. Where the premium is paid periodically, the number of periodic payments, an estimation of the average biometric risk premium as a percentage of the annual premium, and an estimation of the average amount invested shall be included in the information.
The details referred to in the first subparagraph shall also include an explanation of the impact of the insurance premium payments, equivalent to the estimated value of insurance benefits, on the returns of the investment for the retail investor.
5.
The information relating to the term of the PRIIP in the section entitled ‘What is this product?’ of the key information document shall include all of the following:
(a)
the maturity date of the PRIIP or an indication that there is no maturity date;
(b)
an indication of whether the PRIIP manufacturer is entitled to terminate the PRIIP unilaterally;
(c)
a description of the circumstances under which the PRIIP can be automatically terminated, and the termination dates, if known.
6.
Where the PRIIP takes the form of a UCITS or an AIF, the identification and explanation of risks referred to in Annexes II and III to this Regulation shall be consistent with the internal process for identifying, measuring, managing and monitoring risk adopted by the UCITS’ management company in accordance with Directive 2009/65/EC or by AIFMs in accordance with Directive 2011/61/EU. Where a management company manages more than one UCITS or where an AIFM manages more than one AIF, the risks shall be identified and explained in a consistent manner.
7.
Where the PRIIP takes the form of a UCITS or an AIF, the section entitled ‘What is this product?’ of the key information document shall contain the following information for every Member State in which the UCITS or AIF is marketed:
(a)
the name of the depositary;
(b)
where and how to obtain further information about the UCITS or AIF, copies of the UCITS’ prospectus or copies of the description of the investment strategy and objectives of the AIF, the latest annual report and any subsequent half-yearly report of the UCITS as referred to in Article 68(1), points (b) and (c), of Directive 2009/65/EC, or the latest annual report of the AIF as referred to in Article 22 of Directive 2011/61/EU, stating in which language or languages those documents are available, and that they may be obtained free of charge;
(c)
where and how to obtain other practical information, including where to find the latest prices of units.