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COLL 4.7 Key investor information and marketing communications

Application

COLL 4.7.1 R

1This section applies to an ICVC, an authorised fund manager of an AUT, ACS2 or ICVC and any other director of an ICVC where, in each case, the AUT, ACS2 or ICVC is:6

  1. (1)

    a UCITS scheme; or6

  2. (2)

    a non-UCITS retail scheme that is offered to retail clients if the authorised fund manager or ICVC draws up a NURS-KII document instead of a key information document for the scheme.6

Application of the PRIIPs regulation to NURS

COLL 4.7.1A G
  1. (1)

    6An authorised fund manager of a non-UCITS retail scheme or an ICVC that is a non-UCITS retail scheme that is offered to retail clients may draw up either:

    1. (a)

      a key information document in accordance with the PRIIPs Regulation; or

    2. (b)

      until 31 December 2019, a NURS-KII document (in accordance with the exemption in article 32(2) of the PRIIPs Regulation).

  2. (2)

    An authorised fund manager of a KII-compliant NURS or an ICVC that is a KII-compliant NURS will need to comply with COLL Appendix 2R (Modifications to the KII Regulation for KII-compliant NURS), which contains a modified version of the KII Regulation for KII-compliant NURS (see COLL 4.7.3AR).

  3. (3)
    1. (a)

      An authorised fund manager of a KII-compliant NURS or an ICVC that is a non-UCITS retail scheme that is offered to professional clients only is not required to comply with the PRIIPs Regulation or draw up a NURS-KII document.

    2. (b)

      However, these documents may be used to market the non-UCITS retail scheme to professional clients.

Key investor information

COLL 4.7.2 R
  1. (1)

    An authorised fund manager must6 draw up a short document in English containing key investor information6 for investors:6

    1. (a)

      in each UCITS scheme which it manages (a key investor information document); and6

    2. (b)

      in each KII-compliant NURS which it manages (a NURS-KII document).6

  2. (2)

    The words "key investor information" must be clearly stated in the key investor information document and NURS-KII document6.

  3. (3)

    Key investor information must include appropriate information about the essential characteristics of the UCITS scheme or KII-compliant NURS6 which is to be provided to investors so that they are reasonably able to understand the nature and risks of the investment product that is being offered to them and, therefore, to take investment decisions on an informed basis.

  4. (4)

    Key investor information must provide information on the following essential elements in respect of the UCITS scheme or KII-compliant NURS6:

    1. (a)

      identification of the scheme5 and that the FCA is the competent authority of the scheme4;

    2. (b)

      a short description of its investment objectives and investment policy;

    3. (c)

      past performance presentation or, where relevant, performance scenarios;

    4. (d)

      costs and associated charges; and

    5. (e)

      risk/reward profile of the investment, including appropriate guidance and warnings in relation to the risks associated with investments in the scheme.

  5. (5)

    The essential elements referred to in (4) must be comprehensible to the investor without any reference to other documents.

  6. (6)

    A key investor information document or NURS-KII document6 must clearly specify where and how to obtain additional information relating to the proposed investment, including but not limited to where and how the prospectus and the annual and half-yearly reports can be obtained on request and free of charge at any time, and the language in which that information is available to investors.

  7. (6A)

    4A key investor information document must also include:

    1. (a)

      a statement that the details of the up-to-date remuneration policy are available by means of a website, including, but not limited to, the following:

      1. (i)

        a description of how remuneration and benefits are calculated; and

      2. (ii)

        the identities of persons responsible for awarding the remuneration and benefits, including the composition of the remuneration committee, where such a committee exists; and

    2. (b)

      a reference to that website, and that a paper copy of the website information will be made available free of charge upon request.

  8. (6B)

    A NURS-KII document must also include a statement that the details of the up-to-date remuneration policy will be made available free of charge upon request, including the following:6

    1. (a)

      a description of how remuneration and benefits are calculated; and6

    2. (b)

      the identities of persons responsible for awarding the remuneration and benefits, including the composition of the remuneration committee, where such a committee exists.6

  9. (7)

    Key investor information must be written in a concise manner and in non-technical language. It must be drawn up in a common format, allowing for comparison, and must be presented in a way that is likely to be understood by retail investors.

  10. (8)

    Key investor information for a UCITS scheme6 must be used without alterations or supplements, except translation, in each EEA State where a UCITS marketing notification has been made so as to enable the marketing of the scheme'sunits in that State.

[Note: article 78 of the UCITS Directive]

Form and content of a key investor information document

COLL 4.7.3 G

The KII Regulation sets out the form and content of a key investor information document. This Regulation is directly applicable in the United Kingdom and accordingly its articles (but not the preceding recitals) are binding on all firms to which it applies. Under the Regulation an authorised fund manager must ensure that each key investor information document it produces for a UCITS scheme complies with the requirements of the Regulation. For ease of reference the Regulation is reproduced in COLL Appendix 1EU (The KII Regulation).

Form and content of a NURS-KII document

COLL 4.7.3A R

6The following must comply with COLL Appendix 2R (Modifications to the KII Regulation for KII-compliant NURS), which contains a modified version of the KII Regulation for KII-compliant NURS, when producing a NURS-KII document:

  1. (1)

    an authorised fund manager of a KII-compliant NURS; and

  2. (2)

    an ICVC that is a KII-compliant NURS.

Money market funds that are KII-compliant NURS

COLL 4.7.3B R

6Where a KII-compliant NURS is a short-term money market fund, a money market fund or a qualifying money market fund, the authorised fund manager or ICVC must include a statement in its NURS-KII document:

  1. (1)

    identifying it as such a fund; and

  2. (2)

    stating that the NURS’ investment objectives and policies will meet the conditions of the definition of short-term money market fund, money market fund or qualifying money market fund, as appropriate.

Feeder NURS that produce a key information document

COLL 4.7.3C G

6The authorised fund manager of a feeder NURS, or an ICVC that is a feeder NURS, that draws up a key information document for a retail client, should cross refer to documents related to its qualifying master scheme which enable such clients to understand the qualifying master scheme’s key particulars including:

  1. (1)

    its investment strategy;

  2. (2)

    a description and explanation of any material differences between the risk profile of the feeder NURS and that of the qualifying master scheme; and

  3. (3)

    its charges, including the aggregate of the charges of the feeder NURS and its qualifying master scheme as disclosed in the feeder NURS’ most up to date prospectus.

[Note: article 6(2) of the PRIIPs Regulation]

Translation of a key investor information document

COLL 4.7.4 G

While the original key investor information document or NURS-KII document6 is required by COLL 4.7.2 R to be drawn up in English, an authorised fund manager may prepare an accurate translation of it into any language for the purpose of marketing the units of the UCITS scheme or KII-compliant NURS6 in the United Kingdom. Any such translation should be prepared without alterations or supplements.

Pre-contractual information

COLL 4.7.5 R

The key investor information document and the NURS-KII document6 must:

  1. (1)

    constitute pre-contractual information (see COBS 14.2.1A R (Provision of key investor information document or NURS-KII document6));

  2. (2)

    be fair, clear and not misleading; and

  3. (3)

    be consistent with the relevant parts of the prospectus.

[Note: article 79(1) of the UCITS Directive]

COLL 4.7.6 G
  1. (1)

    Section 90ZA of the Act (Liability for key investor information) provides that a person will not incur civil liability solely on the basis of the key investor information document, including any translation of it, unless it is misleading, inaccurate or inconsistent with the relevant parts of the prospectus.

  2. (2)

    Article 20 of the KII Regulation prescribes the wording of a warning to investors that must be included in the "practical information" section of the key investor information document. It states that an authorised fund manager may be held liable solely on the basis of any statement contained in the document that is misleading, inaccurate or inconsistent with the relevant parts of the prospectus for the UCITS scheme.

  3. (3)

    A NURS-KII document should not include the wording of warning to investors in (2) as the limitation of liability in (1) does not apply to KII-compliant NURS.6

Revision and filing of key investor information or key information document or NURS-KII document

COLL 4.7.7 R
  1. (1)

    An authorised fund manager must keep up to date the essential elements of:6

    1. (a)

      the key investor information document for each UCITS scheme which it manages; or6

    2. (b)

      the NURS-KII document for each KII-compliant NURS which it manages.6

  2. (2)

    An authorised fund manager must file the key investor information document for each UCITS scheme or the NURS-KII document for each KII-compliant NURS6 which it manages, and any amendments thereto, with the FCA.

  3. (3)

    An authorised fund manager of a feeder UCITS or feeder NURS6 must, in addition to (1) and (2), file the key investor information of its master UCITS or the NURS-KII document of its qualifying master scheme6, and any amendments thereto, with the FCA.

[Note: articles 63(3) and 82 of the UCITS Directive]

Synthetic risk and reward indicators and ongoing charges disclosures in the KII

COLL 4.7.8 G
  1. (1)

    Authorised fund managers are advised that CESR issued two separate guidelines regarding the methodology that should be used in calculating the synthetic risk and reward indicator and the ongoing charges figure, both of which must be disclosed in the key investor information document for each UCITS scheme which they manage.

  2. (2)

    In line with the KII Regulation and COLL Appendix 2R6, firms in producing their key investor information documents or NURS-KII documents6 should take account of CESR's methodologies in calculating the figures for the synthetic risk and reward indicators and for ongoing charges to be disclosed in those documents. For ease of reference links to these guidelines are shown below, as follows:

    Methodology for the calculation of the synthetic risk and reward indicator in the KII (CESR/10-673)

    https://www.esma.europa.eu/sites/default/files/library/2015/11/10_673.pdf5

    Methodology for the calculation of the ongoing charges figure in the KII (CESR/10-674)

    https://www.esma.europa.eu/sites/default/files/library/2015/11/10_674.pdf5

  3. (3)

    Firms should note that these methodologies may in due course become directly applicable obligations in the light of the European Securities and Markets Authority's powers to develop implementing technical standards in this area.

COLL 4.7.9 G

Authorised fund managers of a UCITS scheme3 and KII-compliant NURS6 are further advised that CESR, and its successor body, ESMA, have3 issued guidelines in relation to several other matters concerning key investor information. These are:

CESR's guidelines on a common definition of European money market funds, which refer to matters that should be included in the key investor information for money market funds and short-term money market funds (CESR/10-049)

https://www.esma.europa.eu/sites/default/files/library/2015/11/10-049_cesr_guidelines_mmfs_with_disclaimer.pdf 5

that apply to all authorised funds in the UK.3

For UCITS only, ESMA's guidelines on ETFs and other UCITS issues, which refer to matters that should be included in the key investor information for certain types of UCITS (ESMA 2012/832)

https://www.esma.europa.eu/sites/default/files/library/2015/11/2012-832en_guidelines_on_etfs_and_other_ucits_issues.pdf 5

3 3

Marketing communications

COLL 4.7.10 G

COBS 4.13.2R(1)(b) and (c) (Marketing communications relating to UCITS schemes or EEA UCITS schemes) require an authorised fund manager to ensure that its marketing communications that contain an invitation to purchase units in a UCITS scheme or EEA UCITS scheme, indicate that a prospectus and key investor information exist, specifying where they may be obtained by the public or how the public may have access to them.