Key things small investors should be told
New EU rules on the information that small investors must be given before they sign a contract were approved by Parliament on Tuesday. This information will be set out in a mandatory, three-page A4 Key Information Document (KID). Before signing a contract, all small (non-professional) investors should be given three-page A4 standard format KIDs to help them to understand and compare packaged retail and insurance-based investment products (PRIIPs), estimate the total cost of their investment as well as be aware of its risk-reward profile.
KIDs should be clearly separated from advertising materials, consistent with any binding contractual documents and prepared by a clearly identifiable entity that created the product.
Parliament's negotiators ensured that where applicable investors will also be informed whether their investment will contribute to any projects with environmental or social aims.
MEPs noted that although PRIIPs can benefit small investors by spreading risks across many different economic sectors or underlying assets, they are nonetheless "not simple" and hence may also mislead them. They therefore ensured that, where applicable, investors will also be given a “ “comprehension alert” warning that "you are about to purchase a product that is not simple and may be difficult to understand”.