Monday October 17 2016

News Source: Fund Regulation

Focus: PRIIPS KID

Type: General

Country: European Union




The European Fund and Asset Management Association (EFAMA) has issued a joint letter with Better Finance outlining two main issues that they say need to be addressed concerning the rules for implementing PRIIPs KIDs.

  1. Past performance

Although not a guarantee for the future, past performances of an investment product are an extremely valuable piece of factual information for investors in their investment decision, if only for investors to know whether the product has made any money or not. EFAMA finds it difficult to understand why investors should be deprived from such information.

Past performances are based on historical facts and can be presented in a standardised way, whenever possible with that of the benchmark chosen by the provider, alongside future performance scenarios. This allows retail investors to understand how an investment product was run in the past, provides facts about a product’s past gains or losses and ultimately allows retail investors to compare similar PRIIPs.

  1. Costs and fees disclosure

EFAMA and Better Finance believe that the costs and fees disclosure in the draft RTS is misleading and that the proposed calculation methodology will deliver misleading results for the following reasons:

  • The market data needed for calculation is not yet available. This will only change once MiFID II/R comes into force and requires further data to be reported.
  • The calculated costs are not the actual transaction costs, but also include market movements and the price at which the transaction actually takes place. This can lead to negative transactions costs, which do not reflect reality.
  • Including market movements contradicts the requirements in MiFID II and IDD which explicitly exclude them.

Both industry bodies believe that the above aspects are fundamental to succeeding in providing the right information to retail investors, and in turn to gain the trust and confidence from consumers.

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