ALFI UCITS IV implementation project – KID Q&A Document
ALFI UCITS IV implementation project – KID Q&A Document
ALFI UCITS IV implementation project – KID Q&A Document
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Chapter 3, Content of Sections of the Key Investor Information <strong>Document</strong>Section 1, Objectives and Investment PolicyNo referenceQ. How important is it for promoters to ensure that their prospectus is fully harmonised with their <strong>KID</strong>s?A. The <strong>KID</strong> and the main prospectus should be coherent. At its simplest that means that they should not contradict oneanother. The EU Regulation 583/2010 also says in Recital 10 that the <strong>KID</strong> "should contain all information necessaryfor the investor to understand the essential elements of the <strong>UCITS</strong>." (<strong>ALFI</strong>'s emphasis.) Provided that they do notcontradict one another and that the <strong>KID</strong> does not omit essential information, practitioners must decide for themselvesthe degree to which the contents of the two documents should be conformed, keeping in mind that Recital 10 alsoacknowledges that the prospectus will contain information that cannot be included in the <strong>KID</strong> for lack of space. Thereis no explicit requirement for the <strong>KID</strong> and the prospectus to share identical text but <strong>ALFI</strong> said in its response toconsultation CESR/09-552 (question 8) that it "finds it hard to see how the description of the objectives, policy and theinvestment strategy will be anything but a verbatim copy of what is in the main prospectus, particularly when the civilliability statement is so onerous". Conversely, CESR's consultation on the use of plain language and the layout of the<strong>KID</strong> (CESR/10-532, page 9) says, "do not copy from the prospectus unless that is in clear language. Some elementsof the prospectus … may be immaterial … [and] you may need to go beyond the prospectus wording to ensure thatyou give a balanced description [of the <strong>UCITS</strong>]".Art 7Q. Is it likely that management companies will amend the investment objectives and investment policies intheir prospectuses in order to ensure that they are the same as the text in the relevant sections of the <strong>KID</strong>?A. At this early stage in the <strong>implementation</strong> of the <strong>KID</strong> there are signs that some practitioners are reviewing their mainprospectus language to ensure that it complies with the plain language requirement of the <strong>KID</strong>. There is nothing in theEU Regulation 583/2010 that explicitly obliges them to do so.Q. May the <strong>KID</strong> cross-reference the prospectus text that describes the fund's investment objective andinvestment policy?A. There is no prohibition on such a cross-reference but the <strong>KID</strong> must contain "all information necessary for theinvestor to understand the essential elements of the <strong>UCITS</strong>". Practitioners who employ cross-references in this part ofthe <strong>KID</strong> may wish to take special care that they have upheld the spirit of the EU Regulation 583/2010. See also Art 21.Q. Can the <strong>KID</strong> present the investment objectives and investment policy in separate sections if that would aidclarity?A. Strictly speaking, no. Art 3(1) says, "No other information or statements shall be included …" The title "Objectivesand investment policy" is prescribed text and there is no provision that would permit it to be divided. However,provided that they comply with the rules on the contents of this section, practitioners are free to write the section asthey think best. In its consultation paper CESR/10-532 (a guide to plain language and layout) CESR presented theoption to split the Objectives and Investment Policy into separate paragraphs and to use sub-headings.Q. May I use the title "investment strategy" rather than "investment policy" if I think it is more commonlyunderstood?A. No. Art 3(1) says, "No other information or statements shall be included …". The title "Objectives and investmentpolicy" is prescribed text and there is no provision that would permit it to be amended.Q. May a brief description of the eligibility criteria for a share class be inserted in the "Objectives andinvestment policy" section? For example, could the <strong>KID</strong> say, "You may buy shares of this Fund if you qualifyas institutional and initially invest at least USD 10 million"?A. The EU Regulation 583/2010 does not prescribe this information for the <strong>KID</strong> and nor does it permit it (Art 3(1): "noother information or statements shall be included"). There is also no example of this information in CESR/10-1321 (the<strong>KID</strong> template) nor is it mentioned in CESR/09-949.<strong>ALFI</strong> <strong>KID</strong> Q&A, Issue 1314, 11 April25 September 2012 Page 12