AIM Report 2019

34 35 Key information documents The Regulation (EU) No 1286/2014 on Key Information Documents (KIDs) for Packaged Retail and Insurance-based Investment Products (PRIIPs) was published on 9 December 2014 and has applied since 1 January 2018. Depending on the investment structure used, some AIM investments come under the PRIIPS regulation, while some managers and investee companies also provide them as part of their efforts to demonstrate transparency. The KIDs must give investors an understanding of the financial instrument, providing details such as the risks, returns and costs associated with it. However, in February 2019, a Joint European Supervisory Authorities (ESA) statement concerning the performance scenarios in the PRIIPs KID was issued, recognising that “the performance scenarios could, based on the recent economic environment, provide an overly positive outlook for potential future returns if they are taken to be best estimate forecasts”. Consequently, the ESA recommended that providers include an additional warning within the section “What are the risks and what could I get in return”, under the heading of “Performance scenarios”: “Market developments in the future cannot be accurately predicted. The scenarios shown are only an indication of some of the possible outcomes based on recent returns. Actual returns could be lower.” In July 2019, the FCA annual report confirmed it was working with ESA and the European Commission on a review of PRIIPs that it said would “primarily focus on improving how risk and reward are displayed in the Key Information Document”. What the future holds There are plenty of reasons to see the AIM market as a strong opportunity for investment, but as our snapshot of company examples has shown, picking the winners remains a key - if difficult - aspect for investors and, more likely, investment managers. This has been underlined by the problems we referred to earlier in this report that have been suffered by one-time ‘star picker’ Neil Woodford, albeit on the FTSE market rather than AIM. The Financial Reporting Council’s (FRC) thematic reviews, the London Stock Exchange’s own recent changes to the listing rules to burnish AIM’s reputation, plus the Office of Tax Simplification’s inheritance tax review all have the potential to introduce new considerations for investing in AIM. However, the market has demonstrated its resilience in recent years, not least through its recovery from the volatility of Q4 2018. “We will continue to work closely with the European Supervisory Authorities and the European Commission (subject to the nature of the UK’s relationship with the EU) as they conduct a full review during 2019 of the Regulatory Technical Standards under the PRIIPs Regulation.” — FCA ANNUAL REPORT 2018-19 Considerations for investment / Future prospects MARKET RESEARCH