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Thomas Richter unleashes anger at funds regulation

RegulationGermany’s fund chief, Thomas Richter, has called for a halt to more industry regulations until existing rules have been scrutinised for their efficacy and clarity.

The chief executive of the German Investment Funds Industry Association (BVI) said more rules were implemented in 2017 than ever before and that one firm produced 560 tonnes of paper to send to its clients just to meet regulatory requirements.

Richter, speaking at the BVI’s annual media briefing, said the Markets in Financial Instruments Directive II (MiFID II) and the Packaged Retail and Insurance-based Investment Products (Priips) directive were to blame for the unnamed firm’s postal challenge, along with certain tax reforms.

“Because of MiFID II, Priips and investment tax reforms, one major German investment company had to send a total of 560 tonnes of paper to its clients through the post – equivalent to the weight of a fully loaded and fully fuelled Airbus 380.”

Richter said the industry was over-regulated.

“Instead of imposing more and more rules, we should be assessing how effective the existing regulations have been and eliminating contradictions and errors.”

For example, he said that under MiFID II and Priips, product costs are disclosed in euros and cents, but the costs are calculated in different ways – and these details, in turn, are “at variance with key investor information and [information produced in relation to Germany’s Reister savings schemes] the Riester PIB.”

Richter singled out the regulatory focus on how much funds cost, which the European Securities and Markets Authority (Esma) said it would review on a regular basis even after applying previous pressure.

“We don’t see what there is about costs that could still be regulated. More cost transparency in relation to investment funds is simply not possible,” he said.

He warned of more confusion being created among investors over these selling costs.

Richter addressed a number of other regulatory issues, including the future of regulation. He said the BVI was critical of the European Commission’s plans for reforming regulatory authorities, which he said meant shifting supervision of certain types of funds to Esma, warning this could extend to Ucits and alternative investment funds.

It raised the “spectre of dual supervision”, he said.

“You can virtually guarantee that there will be competency conflicts between Esma and national supervisory authorities.”

Richters comments came as the BVI reported that funds under management in Germany had broken through €3 billion after its second best year for sales in 2017.

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