On 12 April, the Key Information Document for Packaged Retail and Insurance-based Investment products Level-2 implementing measures was published in the Official Journal of the European Union, marking the end of a long and complicated legislative debate.
EFAMA believes that PRIIPs’ ambitions were excellent and that, from the outset this proposal has seen the strongest show of support from European asset managers. A KID for PRIIPs is a powerful instrument to ensure that consumers receive the right information before making their investment choices, when it comes to this type of packaged investment products.
To put it simply, a KID should give meaningful, comprehensible and comparable information for investors to feel confident and make better investment decisions. The PRIIPs Regulation has, by and large, set up a good framework to achieve this objective.
When it comes to the KID Regulatory Technical Standards, many of their provisions fulfil the purpose of allowing a practical implementation, but EFAMA is discouraged to see that other important provisions simply go against the Level 1 objectives.
EFAMA acknowledges that the EU institutions have made efforts to reconcile various views and find workable compromises.
Throughout the two-year technical process, the final RTSs have benefited from a number of improvements. Unfortunately, these fall short of what the asset management industry would have expected, to the extent that the PRIIPs Regulation will not fully deliver on its original promises to retail investors and could end up being harmful to them.
In spite of repeated requests, EU co-legislators and regulators decided to discard some of the major concerns voiced by both European asset managers and consumer representative organisations. In this context, EFAMA particularly regrets that:
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Historic performances will not be shown in the PRIIPs KID. Even if past performances are not necessarily an indication of future performances, they are based on (historical) facts presented in a standardised way, which shows how an investment product was able to meet or exceed its objectives and deliver value to its clients. This is a clear step back from the UCITS KIID.
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The methodology for the calculation of the transaction costs is based on erroneous assumptions, which can mislead investors into believing that a product is more, or less, expensive than it is in reality.
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Cost disclosure. Costs are now averaged over a product’s recommended holding period. Retail investors will no longer be able to compare costs of the same products if these have different holding periods.
As a result of this, meaningful comparisons between different products will be made more difficult, if not impossible.
Press release
© EFAMA - European Fund and Asset Management Association
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