New EU regulations exclude Irish investors from certain investments

The introduction of new European wide regulations on Monday aimed at making investment products more consumer friendly will see Irish investors temporarily excluded from investing in certain foreign listed investments. The ban will last until foreign fund providers can meet the documentation requirements of the new rules.

While Mifid II (the Markets in Financial Instruments Directive) may be garnering the most attention of late, it’s not the only new EU regulation to impact Irish investors.

On Monday January 1st, the EU Regulation on Packaged Retail and Insurance-Based Investment Products (PRIIPS), came into effect. The new regulations, which cover a market worth some €10 trillion, aim to make it easier for investors to compare products to each other, by requiring providers of products such as structured instruments, non-UCITS unitised funds, hedge funds, unit-linked insurance policies and with-profit products, to provide certain documentation for the products to be marketed across the European Union. Pensions, deposits and UCITS funds are exempt from the new rules.

However at the moment, many foreign listed investment management providers do not yet have these Key Investor Information Document/Key Information Documents (KIID/KID), which detail the key features, risks, rewards and costs of the product, available in the local language of the investors.

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Paul Laverty, spokesman for Dutch online stockbroker Degiro, says that in practice, this means that some foreign listed products have become temporarily unavailable to purchase for Irish investors.

“The affected products are a selection of different products such as ETFs, derivatives and leveraged products,” he said, but added that the impact won’t be as lengthy for Irish investors as others, as fund providers will likely have some documentation available already in English.

“As many providers are now in the process of making these KIID/KIDs to meet the needs of European investors, we expect that the full impact of this regulatory change will be temporary,” he said.

Davy Stockbrokers has also confirmed that its clients and other Irish investors will be temporarily unable to invest in these products, but expects that product providers will produce a KID “ over the coming weeks/months”, so it doesn’t expect a significant impact in the long run.

In the UK, Bristol based financial services company Hargreaves Lansdown removed all US-domiciled ETFs from its Vantage platform on Monday, including the SPDR Gold Trust and the Nasdaq Biotechnology Index Fund, as they did not meet the KID standards..

Irish investors who currently hold foreign listed products will still be able to hold or sell these investments, but won’t be able to purchase more for the time being.