KID, Product Termsheet, … Small useful guide – European Structured Products market.

Retail investors seeking to invest in structured products in the European market must understand the distinctions between KIDs, product termsheets, and simplified product information.

By accessing these documents through issuers, distributors, or regulators, investors can make informed decisions.

Where retail investors can find these documents and how they relate to two key European legislations: MiFID II and PRIIPs ?

Key Information Documents (KID).

A Key Information Document (KID) is a standardized, easy-to-understand document that provides essential information about a financial product, including its risks, costs, and potential returns. The KID is mandated by the Packaged Retail and Insurance-based Investment Products (PRIIPs) regulation, which aims to enhance transparency and investor protection in the European market.

Retail investors can access KIDs on the websites of product issuers, distributors, or regulators. The KID is designed to help investors compare different financial products and make informed investment decisions.

Product Termsheets.

A product termsheet is a more detailed document that outlines the specific features, mechanics, and terms of a structured product. While KIDs focus on providing essential information in a simplified format, termsheets delve into the finer details of the product, such as the underlying assets, payout structures, fees, and other key features.

Product termsheets can typically be obtained from the issuer or distributor of the structured product. Investors should carefully review the termsheet to understand the intricacies of the product before making an investment decision.

Simplified Product Information.

Simplified product information is a condensed version of the product termsheet, designed to provide a quick overview of the key features and risks associated with a structured product. This document is typically shorter and less technical than a full termsheet, making it easier for retail investors to grasp the essential aspects of the product without diving into the complexities.

Investors can usually find simplified product information on the websites of product issuers or distributors, or by contacting their financial advisor.

MiFID II and PRIIPs Regulations. Are structured products regulated in Europe?

The Markets in Financial Instruments Directive II (MiFID II) and PRIIPs regulations are two key European legislations that govern the provision of information to retail investors.

MiFID II aims to strengthen investor protection and improve the functioning of financial markets by enhancing transparency, reducing potential conflicts of interest, and promoting competition among financial service providers. Under MiFID II, product issuers and distributors are required to provide investors with clear, comprehensive, and accurate information to help them make informed decisions.

PRIIPs regulation focuses specifically on pre-contractual disclosure requirements for packaged retail and insurance-based investment products, mandating the provision of KIDs to retail investors.

The goal of PRIIPs is to create a level playing field for different investment products and improve investor protection by ensuring that investors receive standardized, comparable, and easy-to-understand information.

Understanding the differences between KIDs, product termsheets, and simplified product information is crucial for retail investors looking to invest in structured products in the European market.

By familiarizing themselves with these documents and the MiFID II and PRIIPs regulations, investors can make well-informed investment decisions and confidently navigate the complexities of the structured products landscape.