ESMA has always given prominence to its objective to protect investors and we will certainlycontinue to look out for retail investors.
Today I want to give ESMA’s perspectives on key priorities for European retail fund investors.
With rising inflation and economic headwinds, now is the right time to look at how key policies
can support the European Commission’s objective of “an economy that works for people”.
ESMA recently issued a report (on 29 April 2022) covering disclosures, and digital tools and
channels1, which outlines one of our contributions to the wider EU retail investment review.
But – given this is the Annual Global Funds Conference - the specific focus I want to take today
relates to investment funds
I will speak about our most important retail investor priorities by covering three topics:
the PRIIPs review, costs and fees of investment funds and sustainability.
The PRIIPs regulation has now been in application for a sufficiently long period of time for
some lessons to be drawn. ESMA and the other ESAs believe that a significant number of
changes should be made to the regulation to improve it, and with that improve the outcomes it
delivers for retail investors.
I am also in a position to be able to present the outcomes of ESMA’s common supervisory
action on costs and fees in UCITS. There are several important lessons to be drawn from the
exercise to improve the fund industry’s practices towards retail investors.
Finally, it is time to stress the growing importance of the sustainability agenda for retail
investors. While we have been working hard to improve the rulebook for disclosures by
investment fund and fund managers, we have to recognise the complexities involved and the
challenges for retail investors, as well as the risk of greenwashing.
The PRIIPs regulation: evolution required
Let me start with the PRIIPs regulation, a key plank in the retail investor disclosure framework.
In early May ESMA and the other ESAs published their technical advice to the European
Commission on the review of the PRIIPs regulation. We consider this a key input for the retail
investment strategy and hope that the Commission will take our advice on board.
Our main message is that a significant number of changes to the PRIIPs regulation are needed
and we would therefore encourage the Commission and the co-legislators to consider a broad
review of the PRIIPs framework. Some outstanding issues cannot be fixed without
amendments to the Level 1. We also think that it is important that when proposals are made
to change the PRIIPs regulation, meaningful consumer testing is conducted to calibrate any
changes appropriately.
It will not come as a surprise to anyone that there is one key topic that we believe is of central
importance: performance and past performance information in the PRIIPs KID.
On performance, in the ESAs’ advice we recommend replacing the current requirement in the
PRIIPs regulation for ‘appropriate performance scenarios’ to be shown for all products, with
the wording ‘appropriate information on performance’. This would allow more flexibility on the
nature of the information provided in the performance section of the KID, and avoid the systematic need to build forward-looking performance scenarios based on modelling, whichare not really appropriate for investment funds...
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