The Association of Investment Companies (AIC) has hit out at the Treasury’s decision to extend Ucits’ exemption from the Priips regime but not extend the same rights to investment companies.
Yesterday (June 1), the Treasury extended Ucits funds’ exemption until December 31, 2026. This means that instead of producing the Priips key information document, Ucits funds sold in the UK will continue to provide a key investor information document as per the requirements of the Ucits directive.
The Priips rules require investment trusts to provide a prediction of future returns using a methodology that takes into account the returns achieved by the trust in previous years, which many in the industry believe is troubling.
Ian Sayers, chief executive of the AIC, said: “We are beyond frustrated that investment companies still have to produce toxic key information documents.
“KIDs should be suspended pending reform for all investments. At the very least, investment companies should be permitted the option to prepare a KID in line with the Ucits requirements."
Sayers said the AIC's research had found that KIDs often exaggerated likely future performance, understated risks and encouraged a ‘buy high, sell low’ strategy.
"Yet our members and their managers are still required to produce this information knowing that it’s likely to mislead investors when competing funds are being protected from these consequences,” he added.
The Financial Conduct Authority (FCA) appeared to acknowledge these concerns in January 2018, when it posted a statement on its website telling firms if they had "concerns that the performance scenarios in a particular Kid may mislead their clients, they should consider how to address this, for example by providing additional explanation as part of their communications with clients.”
This was after FTAdviser queried the regulator on the serious concerns senior industry professionals and trade bodies had about these projections in investor information documents.