Trade body the Investment Association has welcomed news of a change of heart from the regulator on the type of information fund managers must provide investors, but called for an "urgent, early review" of the policy.
FTAdviser reported yesterday (24 January), there had been serious industry concerns about the the way the Financial Conduct Authority was seeking to implement the Packaged Retail and Insurance Based Investment Product(Priips) rules in relation to key investor information documents (Kids).
The rules required firms put projections of future performance into the document, and applied to investment trusts immediately, and to open ended funds in two years time.
Simon Fraser, an industry veteran who chairs the £4bn Foreign and Colonial Investment trust, said such information without caveats created the potential for a “mis-selling scandal”.
Mr Fraser said he had wanted to include a cover letter with the Kids to mitigate the impact of including future return projections, but was refused permission by the FCA to do this.
However shortly after FTAdviser’s story appeared, the FCA announced it was changing the rules to allow for more flexibility.
Now where a fund manager or adviser is concerned performance scenarios in a Kid are too optimistic, such that they may mislead investors, the FCA said it is "comfortable with them providing explanatory materials to put the calculation in context and to set out their concerns for investors to consider".
The Investment Association is the trade body for open-ended funds, which would have been impacted by the Kid rules in two years.
A spokesperson for the Association said: “We welcome the FCA’s recognition of the serious challenges emerging in the Priip key information document.
"From a positive starting point of trying to make different products comparable, the Kid now makes it almost impossible to compare similar products.
"Performance scenarios and the way charges and transaction costs are presented are exceptionally difficult for customers to understand.
"What is needed is an urgent, early review in order to fix these problems.”
David.Thorpe@ft.com
