On 3 January 2018, The Packaged Retail and Insurance-based Investment Products Regulation’s (Priips) will come in to force under EU law.
These rules are designed to enhance investors’ understanding of retail investment products whether bank, insurance or fund-based. They do so by adapting existing Ucits disclosure rules into a Priip Key Information Document (Kid).
However, Efama has said in a statement it has serious concerns that the Priip rules will at best confuse investors and at worst mislead them.
The authority says it is becoming clear, as firms apply the new EU rules in practice, that they will not achieve the desired objective.
“Instead, 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,” Efama says.
“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,” the authority says.
EFAMA says it told the EU regulators on a number of occasions that the proposed rules would likely have negative consequences on Priip investors.
“We did this jointly with investor representative associations. The industry also remodelled calculation methodologies and provided practical solutions to get the rules right for investors.
“Regrettably, our concerns and proposals were ignored in the final rules,” the authority said.
If no changes are made to the Priips regulation before it comes into law, Efama said it expects to see its concerns about new disclosure rule and negative effects it will have on investors materialise.