The Packaged Retail and Insurance-based Investment Products (PRIIPs) regulations are not fit for purpose, according to the European Fund and Asset Management Association (EFAMA).
Responding to a consultation paper from the European supervisory authorities on proposed amendments to the PRIIPs regulation, EFAMA said that EFAMA’s paper “will not address the full extent of the PRIIPs Key Information Document (KID) flaws”.
The PRIIPs regulation provides a short-term exemption for UCITS manufacturers and those advising or selling such products to provide a PRIIPs KID.
The exemption period from these rules will end on 31 December 2019, meaning from 1 January 2020, UCITS and relevant non-UCITS funds will be required to prepare both a PRIIPs KID and UCITS KIID.
EFAMA has stated the proposed changes in the performance scenarios section of the KID is misinterpreted.
Responding to the paper, EFAMA said: “This consultation will not propose solutions to all problems and flaws that we have highlighted and offered solutions to, and it is wrong to imply otherwise.” It also stated the timeframe to implement these solutions is not realistic.
“Until the PRIIPs KID rules are appropriately designed to give accurate and clear information to help investors make informed investment decisions and compare products, EFAMA is convinced that consumers must continue benefiting from the well-functioning UCITS KID.”
It added: “The short time-frame makes it difficult for consumer testing to be arranged. In any case, EFAMA does not believe that the improvements that are required will be made in the given timeframe in time for the European Parliament’s final plenary vote in April 2019.”
“The proposal to phase out the UCITS exemptions without this assessment having taken place is legally questionable. Any proposal to change the current UCITS exemption would also necessitate substantial changes to the UCITS Directive [...] EFAMA does not believe this will be achievable in a timely and responsible manner.”
EFAMA concluded it would be responding to the ESA’s consultation paper in due course and said in the meantime it “implored the European Commission to conduct an urgent review, which must involve appropriate consumer testing, and the collection of robust data and evidence to properly analyse the PRIIPs regulation”.
The authorities will consider the feedback received from this consultation paper by 6 December 2018 and intends to submit the regulatory technical standards to the European Commission for endorsement during January 2019.
