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PRIIPS Feedback & Concerns Raised
4th March 2019
PRIIPs: Feedback Published and Concerns Raised
On Thursday, (28 February 2019), the FCA published a Feedback Statement following the response to a Call for Input in July 2018.
The FCA’s Call for Input sought views and evidence on market participants’ initial experience of the Packaged Retails and Insurance-based Investment Products (PRIIPs) Regulation and the related Regulatory Technical Standards (RTS) that became effective in January last year (2018).
As a reminder, the PRIIPs legislation (i.e. the PRIIPs Regulation together with the PRIIPs RTS) requires those who produce, advise on or sell PRIIPs to retail investors within Europe to prepare and provide consumers with a standardised key information document on each product – also known as a KID.
A KID aims to standardise the information received by a retail consumer and thus aims to improve a retail consumers’ understanding of investment products and allow them to more easily compare products.
The Feedback now published by the FCA (FS19/1) summarises the responses they received from firms with regards to PRIIPs within its first year. Detailed were concerns that many of the respondents raised about the uncertainty of scope of products needing to comply with PRIIPs and the unintended effects on compliance requirements. In particular respondents raised concerns over the standardised risk indicator (SRI) calculations as well as misleading performance scenarios.
Since PRIIPs Legislation is directly applicable across the EU, any amendments that might be proposed, would only be able to be actioned upon by the EU. The FCA have therefore advised that they will continue to work closely with the European supervisory authorities and the European Commission to address some of these concerns, however this will in part be subject to the UK’s relationship with the EU going forwards.
However, the FCA have confirmed to market participants that they also have significant “concerns about potentially conflicting requirements or lack of clarity about scope of application of PRIIPs requirements” and, going forwards, they will therefore be looking to consider the extent to which domestic interpretive guidance could mitigate their concerns around performance scenarios, Summary Risk Indicators and the scope of the PRIIPs legislation.
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“We are particularly concerned that the prescribed methodology for calculating the SRI…can result in KIDs for products… having a significantly lower risk rating than we, and the industry, would generally consider appropriate.”
“We share respondents’ concerns about misleading performance scenarios.”
“We believe that the concerns raised about uncertainty about scope and unintended effects of compliance with PRIIPs requirements are particularly serious and may risk causing consumer harm if not addressed”
FCA FS19/1, February 2019
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