Germany: KIDs for PRIIPs are coming


But what is a KID or a PRIIP?

A “KID” is an information sheet consisting of at most three A4 pages. It provides the consumer with information on the main features of the respective product. Focus is on the risks, reward profile and costs associated with the product.

A “PRIIP” is a packaged retail and insurance-based investment product that might be subject to investment risks for retail investors. The PRIIPs Regulation covers all investment products and contracts in which consumers invest money directly or indirectly in the capital market or where its repayment is otherwise linked to the performance of certain securities or reference values. This includes products like structured financial products (certificates and structured deposits), financial products whose value is derived from reference values such as shares (derivatives), investment funds (exception are UCITS), endowment life insurance products and German private pension schemes.


The Delegated Regulation was published in April 2017 and the provisions with regard to KIDs will be applicable from January 2018 onwards. Every retail investor who is interested in investing in a PRIIP and has asked for information about such a product has to be provided with the respective KID. The KID has to be abstract in nature and address the market in general, but with the focus on a special target group of investors. This means, on the other side, that, it has not to address the individual investor. Whether the right target group of investors is addressed, has to be decided by the seller of the PRIIP.

On the other hand, the obligation to ensure compliance of the KID with the legal provisions is with the manufacturer of the PRIIP. The manufacturer is the one who manufactures the PRIIP or that makes changes to an existing PRIIP´s risk and reward profile or the costs associated with an investment in a PRIIP. It is important to know that the responsibility of the manufacturer cannot be delegated, even by outsourcing.


For the manufacturing of a KID, the Delegated Regulation has provisions in place to standardize the content, layout and order of a KID. The most important core contents of a KID will be:

  • Product description including determination of the target investor and the intended purpose of the investment;
  • A summary risk indicator which depicts the market and credit risk in quantitative terms and which must be supplemented to include qualitative statements on liquidity;
  • Three performance scenarios and a stress scenario on the term or recommend holding period of the PRIIP;
  • A summary cost indicator and a breakdown of the costs, including for interim periods;
  • Information on the consequences of an early exit from the PRIIP;
  • For the investor: possible complaint procedures.

What is now different?

With regard to the first draft Delegated Regulation originally submitted by the ESAs, three important changes can be identified:

First of all, the three performance scenarios have been complemented by a so-called stress scenario. The consumer needs to understand what might happen in a worst-case scenario with the investment.

Secondly, if a PRIIP consists of UCITS funds as their target investment, PRIIP manufacturers may use a different calculation method for the information contained in a PRIIP without having to point this out to the investor. This is only possible until the end of 2019.

And, thirdly, a sentence has to be added for all documents for PRIIPs which are considered as being complex under the criteria of MiFID II and the IDD and are therefore not sold on an execution-only basis: “You are about to purchase a product that is not simple and may be difficult to understand.”

What has to be considered by providing a PRIIP?

Any investor who is interested in purchasing a PRIIP, irrespective of the information channel and whether the investor decides in the end to invest in such a PRIIP or not, has to receive a KID with regard to the respective PRIIP.

The seller and the manufacturer of the PRIIP are both liable with regard to the investment advice process respective the content of the KID.

Therefore, both, seller and manufacturer, should make sure that they are compliant with the PRIIPS Regulation as well as the Delegated Regulation and should seek respective legal advice when necessary.

More information on the PRIIPs Regulation is available on the homepage of the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, “BaFin”).