More work is needed on the new packaged retail and insurance-based investment products (PRIIPs) key information documents (KIDs) before launch, or they could be a “danger to investors”, according to the European Fund and Asset Management Association (EFAMA).
The EFAMA has issued a comment paper in response to the European Supervisory Authorities (ESA)’s final draft regulatory technical standards on key information documents (KIDs) for (the draft RTS), published in April.
EFAMA’s key comments identify the RTS’s remaining issues and potential solutions that can make the PRIIP KID “fit-for-purpose”.
Europe’s main asset management trade body believes that PRIIPs KID is a good concept and called it a “great step forward in terms of investor protection”, but under its current guise the trade body believe that it is not ready.
The EFAMA said that it believes it is crucial to get it right, rather than “rushing it through” and pointed that the recently published draft Regulatory Technical Standards fail to meet some of the desired aims.
‘Misleading to investors’
Main EFAMA concerns highlighted that past performance will no longer be disclosed to investors, even though future performance scenarios are based on them. Also, costs are shown only by their impact on returns averaged over the recommended holding period of a PRIIP and the calculation of transaction costs is based on “improper assumptions and leads to false outcomes” that will be “misleading to investors”.
Earlier this year, as reported, EFAMA highlighted its concerns over the product and its relating documents. Now, despite ESA’s work on it final draft regulatory technical standards, the trade body is once again voicing its concerns.
Alexander Schindler, president of EFAMA, said: “Comparability will not be achieved and there is a danger of investors, at best, being led to focus on the wrong issues and, at worst, being misled.
“Not surprisingly, investors, too, are concerned, and consumer representative organisations such as Better Finance, the European Federation of Investors and Financial Services Users, are voicing similar concerns to which EFAMA fully subscribes to.”
Peter de Proft, director general of EFAMA, added: “Given the potential benefits for investors, it is important to get these standards right and properly designed from the start. Unfortunately, the PRIIPs RTS will lead to consumer detriment if kept in their current form”.