Key Investor Information Document (KIID)
The UCITS IV Directive sets out the framework for the KIID, a stand-alone, pre-contractual, 2-page document containing the essential features of the fund and is to be systematically provided to investors before they decide to invest.
What is a KIID?
In an attempt to create a structure for the provision of easily understandable and engaging fund disclosures, Directive 2009/65/EC on UCITS IV and Commission Regulation 583/2010 has replaced the simplified prospectus with the Key Investor Information Document (KIID).
The simplified prospectus was often simply just a “copy/paste” of the full prospectus, with poor design, full of technical terms and lengthy. Due to lack of direction and guidance, the simplified prospectus became an administrative burden with material variations across member states with no real investor benefit.
The main objectives of the KIID remain the same as for the simplified prospectus – provide retail investors with:
- better disclosure,
- easier to understand content and,
- to facilitate comparisons between products.
The key differentiating factor is that under UCITS IV, the European Commission was obliged to adopt implementing measures clearly defining the KIID’s scope and nature.
When considering the KIID, there are three key aspects – the pre-defined content, the production of the KIID and its dissemination to internal and external parties:
We have developed turn-key solutions to address the above. Please contact us should you want to discuss any of these topical issues or any other such challenges in more detail.
When is a KIID not a KIID?
“For the disclosure part, the KIID for UCITS has been identified by the European Commission as the appropriate benchmark. This is clearly something we welcome as we feel it recognises the quality of the work we have been doing to develop the KIID.” Steven Maijoor, Chair of ESMA, opening address at the Paris EUROPLACE Financial Forum
The KIID is a cornerstone in investor protection; it is already been adopted in some jurisdictions as a standard. On one hand, we see the KIID or very similar documents being enforced outside the borders of the EU, strictly speaking, such as in Switzerland and Norway.
But concern with investor protection and adequate disclosure is not unique to Europe. Simplified information sheets are also the standard in Hong Kong and other places in Asia, and today distinct convergence can be seen with the KFS (Key Fact Statement) used for Funds distributed in Hong Kong and the PHS (Product Highlight Sheets) which serves a similar purpose in Singapore.
On the other hand, we see the KIID concept being applied to non UCITS funds. For example local regulators in France, Switzerland and in the Netherlands require a KIID to be produced for funds that are not in scope of the UCITS regulation.
KIID regulatory references
KIID is above all a legal document. Constant reference back to the governing texts and interpretative guidance is necessary to ensure ongoing compliance. Here are the main relevant regulations and governing instruments, along with useful practical considerations from industry groups.