KID - PRIIPs identity card
Published on 23 January 2023
Citizens participating in the financial market are offered investment products complex in their structure as their value directly or indirectly depends, wholly or partially, on market developments. Such products usually offer higher potential returns accompanied by a higher risk of potential losses compared to less complex financial products. They are packaged retail and insurance-based investment products (PRIIPs) whose structure makes it difficult for consumers to understand the risks they pose. PRIIPs offered on the domestic market include life insurance contracts under which the investment risk is borne by the policyholder - insurance-based investment products (IBIPs). In Croatia, such products are usually life insurance contracts which imply premiums being invested in an open-ended investment fund with public offering or linked to an index.
In order to be able to make an informed decision, prior to investing in such products it is necessary to be acquainted with their characteristics, related costs, potential returns and associated risks. Given the complexity of these products and the fact that retail investors often find it hard to understand their features or to compare them, the relevant regulation[1] set out in detail the format and content of key information on these products that needs to be provided to consumers. The most important document to be provided to investors at the pre-contractual stage is the key information document (KID). It is a short and simple document written in understandable language and intended for potential users of packaged investment products, that contains basic information on the product and should serve as the basis for making an informed decision related to the purchase of that product. It provides, among other things, the following information:
- the name of the PRIIP;
- the identity and contact details of the PRIIP manufacturer;
- information on the competent supervisory authority;
- information on the nature and key features of the product;
- information on investment risks (shown in the form of the summary risk indicator (SRI), that takes into account the exposure both to market risk and credit risk associated with that product in relation to expected return);
- information on costs (shown in the form of the summary cost indicator based on the Reduction-in-Yield (RIY), as an indicator showing the decrease in annual return due to costs, along with a description of all costs associated with the product);
- information on possible financial losses due to the default of the PRIIP manufacturer or another related entity;
- documents with additional information.
The KID also contains a section titled “How can I complain?”, containing information about how and to whom a retail investor can make a complaint about the packaged investment product, its manufacturer or a person advising on, or selling it.
Irrespective of the right of retail investors to make a complaint in accordance with the KID, Hanfa would like to point out that financial services users have the right to submit their complaints to Hanfa as well. Any person, including retail investors in packaged investment products, who suspects or believes that their rights have been infringed by Hanfa’s supervised entities, may lodge a complaint to Hanfa against the manufacturer or distributor of that product, to the e-mail address potrosaci@hanfa.hr. More information on how to file a complaint to Hanfa is available at the following link.
[1] Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) and the accompanying delegated regulation, and the Act Implementing Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs)
