The European Commission said this week it wants the key investor information document (KIID) to be extended to all investment products.
The news was first reported by Financial Times subsidiary Ignites Europe. The KIID will replace the UCITS simplified prospectus on July 1. The intention of the KIID is to enhance transparency and disclosure to investors for all financial instruments.
The regulator says Europe wide KIID regulation is necessary because of the risks posed to investors. It believes investors face confusing and overly complex information, which can lead to higher prices and the purchase of unsuitable products, sais the Ignites report.
The move by the European Commission has been highly anticipated by many service providers, particularly KNEIP, the independent data and technology provider that is preparing the funds industry for the implementation of the KIID. It serves 420 asset managers across Europe, via fund administration clients.
KNEIP prepares the two-page KIID documents and uploads them directly to the CSSF, the Luxembourg regulator. The KIID should replicate the investment prospectus of the fund, which will be particularly challenging in the context of the EU regulators plan to extend the KIID to all financial instruments, including about 300,000 investment funds in Europe.
The first KIIDs were finalized over the last six to eight months, and will need to be updated soon. The second round of KIIDs will be due in the first 35 days of the 2013.
However it is understood that regulators, particularly the CSSF, will be unable to check each KIID and is entrusting service providers to ensure the two-page document will contain the relevant information.
To support the preparation of the KIIDs, KNEIP launched a statistical prudential report in January this year. Initial notification and written notices service will be launched at the end of May.
Lee Godfrey, deputy CEO of client service delivery, said many companies are still not ready for the KIID. Illustrating the concern about the lack of readiness among fund managers, Godfrey notes that at the end of March there were only about 5% of 420 asset manager clients that were KIID compliant. With a 12 month grandfathering period we thought that 30% of KIIDs would be filled by Christmas. For companies that missed it they are coming to us and its a matter of us getting them ready. The challenge is around updating, continuity and defining the workflow. With about six weeks to go asset managers are being forced to act now.
(JDC)