Warning of ETF sales halt in Sweden after Priips introduction

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Sales of ETFs in Sweden could stop in the New Year because of failures by providers to offer sufficient key information documents (Kids) in line with Priips requirements, according to multiple sources with insight into the issue.

Kerstin Hermansson, managing director of the Swedish Securities Dealers Association (Svenska Fondhandlare Föreningen) confirmed for InvestmentEurope that there are concerns a number of ETF products may be stopped from distribution in the local market because they fail to meet Priips requirements. The EU’s Packaged Retail and Insurance-based Investment Products Regulation stipulates specific information that retail investors need to be able to make informed choices when it comes to packaged products.

An article published by Swedish business daily newspaper Dagens Industri has suggested that banks in Sweden will in particular be not able to distribute ETFs from US providers. Hermansson said this seems to be the case, if the providers have not provided Kids. Although that article referenced Mifid II requirements, she said the challenge particularly sits in the Priips Regulation.

That view has been echoed by Claes Hemberg, a savings economist and expert in personal finance who works at Avanza in Sweden, and who is one of the best known voices on the impact of fiscal and monetary policies as they affect retail investors and savers locally.

The Swedish challenge reflects comments obtained from Germany, where Thomas Richter, chief executive officer of BVI, the Germany Investment Funds Association, has said: “From New Year, investment fund unit buyers will face a patchwork of contradictory information in 2018.”

“Depending on the distribution channel, they will then receive up to four different documents for one and the same investment fund, with inconsistent content in key points. This will confuse consumers rather than making things clearer.”

Richter says that the BVI had already pointed out this problem to the regulators on several occasions in the past.

On 22 December, the European Fund and Asset Management Association issued a “call for urgent action” on the matter.

Efama said that “the new rules are threatening to cause serious investor detriment by mandating figures, particularly in relation to performance and costs, that will at best confuse investors and at worst mislead them.”

“In short, the Priip Kid risks forcing manufacturers to make claims for products that breach the fundamental principle that investor communication must be ‘clear, fair and not misleading’. The new methodology for calculating transaction costs will also produce confusing and unreliable figures.”

“This is clearly a problem for Priips investors who will be presented with misleading Priip Kids from 3 January 2018. However it is also a problem for Ucits investors because the [European] Commission may choose to scrap the Ucits Kiid for the Priip Kid in 2019. Efama considers this a serious retrograde step – indeed, a step back from the clarity of Ucits disclosure to the misleading obfuscation of Priips.”

BVI: Investors will be offered a patchwork of information in 2018