Finally, the regulator wants to know the industry’s view on how best to decide when a product is suitable for the retail market or not.
The consultation closes on March 7 next year, and firms will be required to follow the current Priips guidelines until new rules come into force.
Not fit for purpose
In the Edinburgh Reforms, announced by chancellor Jeremy Hunt last Friday (December 9), the Priips regulations were described as not fit for purpose.
Both the Priips and Ucits regulations were introduced by the EU, and onshored by the UK after Brexit.
The Priips regulation has proved controversial, mainly due to the inclusion of performance scenarios in the key investor documents (Kids).
Currently Priips rules require providers to include performance scenarios in their Kids. These scenarios are calculated in line with specific methodologies prescribed in the Priips rules.
They require the use of historical data to calculate the potential returns that an investor may receive under different market conditions.
The government said the “highly prescriptive” format requirements of the Kid has restricted the flexibility with which firms can communicate effectively with their clients, and leads to companies producing their own fact sheets alongside the Kid.
“Such a range of standardised and non-standardised documents can be confusing for investors and an unnecessary burden for firms,” it said, and furthermore, it can restrict the choice of retail investors.
The government also criticised key investor information documents, which Ucits funds are required to produce.
There has previously been discontent over this, with the AIC saying the two disclosures are “not comparable”.
sally.hickey@ft.com
