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German funds welcome Priips delay

DeadlineA German funds trade body - which is one of the most vociferous critics of Priips regulations - has welcomed European Parliament’s decision to extend deadlines for a review.

The Parliament’s Committee on Economic and Monetary Affairs (Econ) passed a draft resolution earlier this week to extend two deadlines relating to the implementation of the Priips – the Packaged Retail and Insurance-based Investment Products - regulation, including the requirement for the use of ‘key investor documents’ (KIDs).

Retail funds will now have to start publishing KIDs in 2022 instead of 2020, giving the industry and regulators time to review certain details of the documents that critics including the German Investment Funds Association (BVI) say were flawed.

The BVI and others such as the UK’s Investment Association have warned that the methodology used in performance scenarios within in KIDs would mislead investors.

A broader Priips review has also been extended by a year until the end of 2019 – a move that could allay concerns that the industry did not have enough time to thrash out complex issues.

Thomas Richter, chief executive officer of BVI, said: “This is an important step for European consumers. The longer deadlines give us more time to work with the regulatory authorities to remedy the shortcomings in the Priips KID. Logically, this should take place during the review of the Priips rules scheduled for next year.”

Until the implementation of the KIDs, Priips funds will continue to use the key investor information documents stipulated by the Ucits Directive.

Richter said there was now no longer any reason for a “quick fix” to the flaws of the Priips. The European Supervisory Authorities had proposed amendments at the start of November, but critics said more consideration was needed – a view the Parliament appears to have accepted.

At the root of the BVI resistance is the “misleading” calculation of transaction costs and performance scenarios.

Andre Nogueira, director of trading analytics at broker ITG, said: "What’s interesting about this is the length of the delay - two years seems an awfully long time to simply iron out some creases. This could suggest that the changes to Priips are more complicated than expected."

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