BACKGROUND
In 2018, an EU regulation, intended to protect “Retail” clients by ensuring that they are provided with adequate disclosure when purchasing certain products took effect. This disclosure document is referred to as a Key Information Document, or KID, and it contains information such as product description, cost, risk-reward profile and possible performance scenarios.

This regulation is known as the Packaged Retail and Insurance-based Investment Product Regulation (MiFID II, Directive 2014/65/EU), or PRIIPs, and it covers any investment where the amount payable to the client fluctuates because of exposure to reference values or to the performance of one or more assets not directly purchased by such retail investor. Common examples of such products include options, futures, CFDs, ETFs, ETNs and other structured products.

The UK Financial Conduct Authority (FCA) has equivalent requirements for UK residents.

It’s important to note that a broker cannot allow a Retail client to purchase a product covered by PRIIPs unless the issuer of that product has prepared the required disclosure document for the broker to provide to the client. U.S. clients are not impacted by PRIIPs, so the issuers of U.S. listed ETFs do not as a rule create KIDs. This means that EEA and UK Retail clients may not purchase the product. Clients nevertheless have several options:

1. Many US ETF issuers have equivalent ETFs issued by their European entities. European-issued ETFs have KIDs and are therefore freely tradable.
2. Clients can trade most large US ETFs as CFDs. The CFDs are issued by IBKRs European entities and as such meet all KID requirements.
3. Clients may be eligible for re-classification as a professional client, for whom KIDs are not required. 

CLIENT CATEGORISATION
We categorize all individual clients as “Retail” by default as this affords clients the broadest level of protection afforded by MiFID. Client who are categorised as “Professional” do not receive the same level of protection as “Retail” but are not subject to the KIDs requirement. As defined under MiFID II rules, “Professional” clients include regulated entities, large clients and individuals who have asked to be re-categorised as “elective professional clients” and meet the MiFID II requirements based on their knowledge, experience and financial capability.

We provide an online step-by-step process that allows “Retail” to request that their categorisation be changed to “Professional". The qualifications for re-categorisation along with the steps for requesting that one’s categorisation be considered are outlined in KB3298 or, to directly apply for a change in categorisation, the questionnaire is available in the Client Portal/Account Management.