Kii Hub’s Cumming expresses hopes that troublesome KIIDs will fall into line

Kii Hub’s director Nick Cumming says the industry is still struggling to provide uniform Key Investor Information Documents, but that ultimately investors will benefit.

The deadline for providing Key Investor Information Documents (KIIDs), the new investor fund disclosure documents for UCITS funds, was July 2012. For a seemingly innocuous document it was a nightmare birth. Large project teams in fund management groups and their suppliers sprang into being to solve the problems and the labour pains will continue for some time.

The EU KIID regulations were published in July 2010 and you could be forgiven for thinking that two years to get these documents in place would be ample time. So why did this exercise cause so much trouble?

Firstly it’s worth reviewing the aim of these new documents. The old Simplified Prospectuses which they replace intended to provide a standard of information where investors could easily compare funds on a like for like basis across the EU. The fatal flaw in this noble ambition was to leave it up to member state regulators to come up with their own interpretation of what the rules meant. The resultant mishmash of documents beggared belief, with UK providers going down a route of producing Simplified Prospectuses that were anything but, and some other states generating documents that were, shall we say, ‘short and sweet’. Documents varied massively in complexity and language with many rightly criticised for the use of technical language and jargon which only served to confuse investors.

Enter the dragon, in the form of the KIID. By regulation these would be no more than two sides long, follow a set structure, be written in plain language and contain highly standardised information on charges, performance and risk. Investors would now be able to genuinely compare like with like and truly understand the nature of the investment. What could possibly go wrong?

To be fair, the problem was not so much with the information provided to the investor – on the whole, KIIDs are better information tools. The industry, however, has struggled on a number of fronts. The regulations require the documents to be written in plain language and to only contain information that is material and relevant to the decision to invest. Sounds fair enough, but the howls of outrage from legal and compliance departments across the European fund management industry were deafening. Only being allowed to talk about material investments and risks within KIIDs meant all sorts of comforting disclaimers had to be removed. The result – much debate and numerous meetings to decide which treasured investment caveats could possibly be let go. To meet plain language requirements and writing in, as one Luxembourg fund manager described, “Noddy language” challenged groups’ psyches on a number of levels. After all, is there really much wrong with calling a spade an earth inverting horticultural implement?

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