Chief executive of the Financial Conduct Authority Andrew Bailey has said the regulator will take action to address the unintended negative implications of European regulatory standards PRIIPS and MiFID II as early as next month.
Both regulatory frameworks came into effect in January 2018 and have both caused concerns among the asset management industry with regard to their disclosure requirements.
Speaking at the FCA's Asset Management Conference 2018 this morning, Bailey said: "Our supervisors have begun work to analyse how costs and charges disclosure reforms are working in practice and we will publish a report for input next month to explore the scale of the potential problems".
PRIIPs requires asset managers to provide a Key Information Document (KID), which has received much criticism due to its controversial requirement to provide predictions of future performance as well as estimations of transaction costs.
The performance predictions have been described as misleading and the transaction costs estimations have already resulted in documents printed with negative costs estimations.
Bailey said: "To be quite clear, I am concerned about PRIIPs and I know I am not alone in this.
"It carries a risk that is leading to literally accurate disclosure, which is not providing useful context.
"There are also concerns about performance projections and we all have to take this very seriously."
He added there is also evidence that US firms are "withdrawing from Europe to avoid the burden".
Bailey said going forward the FCA would "continue to engage with firms and trade associations to consider how these concerns will be resolved so that we can get the full benefit of the objective of the regulation".
He added: "We will also continue to work with ESMA and contribute to the EC's post-implementation review of PRIIPS.
"We should not be afraid to say this has not gone as we hoped it would and as we wanted it to."
Elsewhere, Bailey said the FCA was also keeping an eye on the impact of MiFID II's research unbundling requirement, which forces asset managers to pay for research separately from other broker services.
He said: "The reform has had an effect on the market for research and the market is still adjusting to the price discovery unfolds.
"We are going to keep this under very close scrutiny."
Speaking later in the day at the FCA's conference, the IA's Chris Cummings said PRIIPs continues to be a key area of concern for the trade body.
He said: "Sadly, what has happened is a PRIIPs' KID now gives costs and charges information, which may be technically correct but realistically is misleading
"This is deeply, deeply unsatisfactory."
Cummings welcomed Bailey's commitment to assessing these difficulties, adding the IA would "continue to campaign at the UK and EU level" on the issues.
He added: "We now have a disclosure regime in the PRIIPs KID that nobody now supports"
"KIDs need a complete review, with intention of making it really clear to clients what they are paying for"
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