RegulationJun 14 2018

IA chief says Priips rule's need 'complete review'

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IA chief says Priips rule's need 'complete review'

Rules meant to improve the asset management sector for investors have been branded unsuitable and in need a complete overhaul by the chief executive of industry trade body the Investment Association (IA).

Speaking at the Investment Association conference in London on 13 June, Chris Cummings said he knew he echoed the concerns of many in the industry when he expressed concern about the effectiveness of the Packaged Retail and Insurance-based Investment Products (PRIIPs) rules, which came into force on 1 January 2018.

In particular, ire has been focused on the key investor documents (Kid) asset managers are required to produce under the Priips regulations.

Asset managers must include a projection of future performance in the Kid document, and to disclose the level of their transaction costs.

The rules currently apply only to closed ended funds, such as investment trusts, but are scheduled to apply to the much more widely-held open ended funds within two years. The Investment Association is the trade body for open ended funds. 

“We know people, especially younger people, don’t read things they get on paper. As an industry we send them paper, we know they don’t read it, so we send them more paper.

"We need to move to a system that reflects how people really are, and the current Mifid {Markets in Financial Instruments Directive II] and Priips rules do not do that.” 

He said: “The Kid [that firms are required to produce under the Priips rules] needs a complete review. And there is a transaction disclosure regime that no one supports.”

Andre Stern, chief executive of Oxford Asset Management said the rules as they are now "infantilise people”.

At the same conference Andrew Bailey, chief executive of the Financial Conduct Authority (FCA) said a change in the way the rules are implemented will be introduced by the regulator.

There has been considerable disquiet in the industry about the impact of the Kid rules, with Simon Fraser, chairman of the F&C investment trust, describing the rules as a potential mis-selling scandal.