FCA: MiFID II and PRIIPs brought ‘enormous change’ to firms
01 March 2019 London
Image: Shutterstock
The second Markets in Financial Instruments Directive (MiFID II) and the Packaged Retail and Insurance-based Investment Products (PRIIPs) “brought enormous change to how firms operate and the information they are required to give their customers”, according to Andrew Bailey, chief executive of the Financial Conduct Authority (FCA).
Commenting on the FCA’s key findings that assess the effectiveness of disclosure by asset managers and intermediaries to meet the compliance of MiFID II and PRIIPs, Bailey said: “While awareness of the rules appears good, we found that firms take inconsistent approaches, risking confusion for customers, who may be misled about how much they are being charged.”
The FCA found that most of the asset managers in its review calculate transaction costs according to the relevant rules and there was “a good level of compliance with the documents firms are required to produce”.
However, the FCA indicated that its review identified problems with the way some asset managers calculate transaction costs and how prominently they disclose them.
The FCA also found that asset managers generally do not disclose all associated costs and charges and where full disclosures are made inconsistencies between documents and website mean consumers can find the information difficult to understand.
The authority also published findings on the call for input, which sought views on the initial experiences of the requirements introduced by PRIIPs, including transaction cost reporting and the scope of PRIIPs, summary risk indicators and performance scenarios.
Commenting on the FCA’s findings, Alex Dorfmann, director of product management at SIX stated: “These findings prove this approach is simply not sustainable, and that firms need to adopt longer-term thinking when it comes to compliance”.
He added: “The problem is that in the run-up to MiFID II and PRIIPs, too many financial institutions adopted a ‘do whatever it takes regardless of the cost’ approach just to keep the prying eye of the regulators away.”
“There is a significant crossover between MiFID II and PRIIPs. While the same level of detail may not be required, a lot of information market participants distribute for MiFID II is reflected under PRIIPs.”
“Be under no illusions, as the FCA and others begin to shift their focus from demanding data consistency to seeking data quality, the industry can ill afford to neglect a reassessment of their compliance approach. Especially with the continuing pressure to be more cost efficient and automate manual processes."
Commenting on the FCA’s key findings that assess the effectiveness of disclosure by asset managers and intermediaries to meet the compliance of MiFID II and PRIIPs, Bailey said: “While awareness of the rules appears good, we found that firms take inconsistent approaches, risking confusion for customers, who may be misled about how much they are being charged.”
The FCA found that most of the asset managers in its review calculate transaction costs according to the relevant rules and there was “a good level of compliance with the documents firms are required to produce”.
However, the FCA indicated that its review identified problems with the way some asset managers calculate transaction costs and how prominently they disclose them.
The FCA also found that asset managers generally do not disclose all associated costs and charges and where full disclosures are made inconsistencies between documents and website mean consumers can find the information difficult to understand.
The authority also published findings on the call for input, which sought views on the initial experiences of the requirements introduced by PRIIPs, including transaction cost reporting and the scope of PRIIPs, summary risk indicators and performance scenarios.
Commenting on the FCA’s findings, Alex Dorfmann, director of product management at SIX stated: “These findings prove this approach is simply not sustainable, and that firms need to adopt longer-term thinking when it comes to compliance”.
He added: “The problem is that in the run-up to MiFID II and PRIIPs, too many financial institutions adopted a ‘do whatever it takes regardless of the cost’ approach just to keep the prying eye of the regulators away.”
“There is a significant crossover between MiFID II and PRIIPs. While the same level of detail may not be required, a lot of information market participants distribute for MiFID II is reflected under PRIIPs.”
“Be under no illusions, as the FCA and others begin to shift their focus from demanding data consistency to seeking data quality, the industry can ill afford to neglect a reassessment of their compliance approach. Especially with the continuing pressure to be more cost efficient and automate manual processes."
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