Asset Management & Investment Funds Q&A: December 2017

Question

What should non-UCITS funds which are not selling to EEA retail investors do about the PRIIPs KID requirements?

Answer

Irish Funds published an information note on a common approach for non-UCITS not selling to EEA Retail Investors under PRIIPs. 

From 1 January 2018, non-UCITS funds marketing to retail investors within the EEA must comply with the PRIIPs Regulation. Recital 12 of the PRIIPs Regulation provides that where a product is not sold to EEA retail investors, there shall be no obligation to draw up a KID. On this basis the Irish Funds working group has recommended that non-UCITS funds (i.e. QIAIFs, QIFs and PIFs) which do not sell units to EEA retail investors should apply at least one of the following options before 1 January 2018 if the non-UCITS does not intend to make a KID available:

  • amend its offering document to clarify that the non-UCITS will only be open to subscriptions from EEA investors if they are professional clients as defined under MiFID II
  • amend its subscription application document with a similar restriction
  • pass a board resolution to close the fund to subscriptions from EEA retail investors, and to refuse any application from existing EEA retail investors to increase their investment or
  • otherwise ensure that procedures are in place to ensure that the non-UCITS is not being offered / marketed / sold to EEA retail investors.

Following 1 January 2018, a non-UCITS which does not intend to prepare a KID may decide to amend its offering document as part of its next general update to clarify that the non-UCITS will only be open to subscriptions from EEA investors if they are professional clients as defined under MiFID II.

In respect of existing retail investors who are invested prior to 1 January 2018 in these non-UCITS funds, Article 6 of the PRIIPs Regulation provides that the KID shall constitute pre-contractual information and so there will be no requirement to prepare a KID unless:

  • the existing legacy retail investors subscribe for additional shares post 1 January 2018 or
  • post 1 January 2018 the non-UCITS funds is offered / marketed / sold to EEA retail investors (but in that case, the KID does not need to be provided to those legacy retail investors).

Date published: 20 December 2017