The Financial Conduct Authority (FCA) should immediately suspend the rules around returns projections for investment products, two industry trade bodies have urged.
Chris Cummings, chief executive of the Investment Association, said the regulator had already received evidence of investor detriment and should not hesitate to act.
In his response to the FCA’s call to input on the Priips rules, he said: "Urgent action is now needed by the FCA to address the flawed methodologies of Priips which are having harmful consequences for savers and investors across the UK retail and DC pensions markets.
"The FCA rightly called for evidence of investor detriment caused by the new rules. It has been delivered. The case is now proven and it’s time for action."
Ian Cornwall, director of UK regulation at the Personal Investment Management and Financial Advice Association (Pimfa) shared this view.
He said: "Very few of the distributor issues that we identified in submissions to consultation papers and in discussions with policy staff were addressed by subsequent regulatory documents and Pimfa regard the FCA’s call for input as an opportunity to highlight some of these issues again."
The Packaged Retail Investment and Insurance Products (Priips) rules, brought in this year alongside the Markets in Financial Instruments Directive, require investment trusts to provide a prediction of future returns using a methodology that takes into account the returns achieved by the fund in previous years. The rule will extend to open-ended funds in the years ahead.
Simon Fraser, who chairs the Merchants and F&C investment trusts, has previously said the performance projections were a "future mis-selling scandal".
He said: "Throughout my career I have been told I have to say past performance is not a guide to future return, and now apparently I have to say it is."
Speaking at the FCA’s asset management conference in June he admitted the rules were "not perfect".
Mr Bailey said the rules were a "major change" for the industry, and that it was "appropriate after a period of major change to allow the market to evolve and adjust, and then see what the problems are, and we have done that."
He added: "The rules are providing literally accurate disclosures but that is without context. We are taking concerns about the performance projections on board, and we continue to engage on this."
An FCA spokesman said: "We have said we will aim to publish a feedback statement on this call for input in early 2019. The responses will also inform our future engagement on the Priips legislation with the [European regulators] and other national competent authorities."