FE urges Brussels to revise Priips rules as concerns mount

EU-Euro-Europe-Eurozone-700x450.jpgFE managing director Michael Holland has urged the European Supervisory Authorities to revise two key measures in the regulatory technical standards within the Priips regulation.

In November the European Commission has decided to delay the introduction of its Priips regulation by one year and asked the ESA request to consider amendments to the RTS, after MPs voted for a redraft of the rules in September.

The open letter is addressed to Steven Maijoor, Gabriel Bernardino and Andrea Enria, chairs of ESMA, EIOPA and the EBA respectively, who respectively represent the ESA.

While FE welcomes the one-year Priips delay, it asks ESA to address changes within parts of the rules due to concerns “over the details when putting those proposals into practice”.

FE has asked for changes in Priips’ treatment of Multi Option PRIIPs (MOPs) with reference to investments in Ucits as well as the performance scenario calculations.

The funds rating firm is concerned consumers might be left with Ucits KIIDs and PRIIPs KIDs with similar risk indicators but different scales and costs reporting, if rules are not changed.

FE suggests thresholds of risk scales for Ucits and Priips KIDs should be the same to make sure the transition from the two documents in 2019 is “less confusing for consumers”.

The firm also says the risk and costs sections in the MOP KIDs, shouldn’t just show the range of risk classes but include a statement that the risks and costs faced by the consumer will depend on the choice of fund.

Along with keeping past performance of funds alongside to a “suitable benchmark”, FE also urges the ESA to change the existing formula of RTS to look at 10 years’ historical data for funds instead of five as otherwise data can deliver “potentially distorted forward-looking scenarios.”

Holland says: “For the laudable goals outlined by Commissioner Barnier as he presented Regulation 1286/2014 to be achieved, consumers must have a ‘basic information document to help [them] make the right choice’ and the document must show ‘in simple language what they are investing in, and what the risks are’.

“We believe our recommendations bring those goals nearer and we strongly urge you to consider them as part of your submission of a revised set of regulatory technical standards.”