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Efama says Priips consultation is too short and too restricted

Regulatory white paperEurope’s asset management trade body has told financial regulators that their recent consultation paper does not go far enough in scrutinising the controversial ‘Priips’ investor information document.

The European Fund and Asset Management Association (Efama) said the consultation will not cover enough of the flaws in the ‘key investor document’ (KID) that replaces the existing ‘key investor information document’ for many European funds.

European Supervisory Authorities (ESAs) published the consultation paper on November 8 and Efama said it was “disappointing that it only addresses one aspect of its inherent flaws, namely performance scenarios.”

There is no attempt to solve other issues “fundamental to investor protection”, such as the methodology for calculating transaction costs or “overly complicated” cost disclosures, Efama said.

“In other words, 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,” said Efama.

In the consultation paper, the ESAs acknowldedge the short time frame and said this was due to European Parliament elections next year. Only the more pressing issues could be dealt with, the paper said.

But four weeks is not long enough for industry debate or consumer testing, said Efama, and added that the improvements required would not be made in time for the European Parliament’s final plenary vote in April 2019.

The KID is a requirement of the Packaged Retail and Insurance-based Investment Products regulation, known as Priiips. Funds governed by Ucits regulations and which produce their own ‘KIID’, or key investor information document, have a temporary exemption.

Efama added: “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 benefitting from the well-functioning Ucits KIID,” and 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, and considering the complex EU legislative process, and subsequent member state implementation, Efama does not believe this will be achievable in a timely and responsible manner,” the trade body said.

Efama said it will be responding comprehensively to the ESA’s consultation paper in due course.

“In the meantime, we implore 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.”

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