The controversial extension of the PRIIPs Key Investor Document (KID) requirement to UCITS funds has been delayed by another two years amid mounting pressure from the asset management industry, regulators and MEPs.
MEP's voted on Monday (3 November) to confirm the delay, which will hold off the plans until 2021.
Commenting on the delay, Jonathan Lipkin, director of policy, strategy and research at the Investment Association, said: "We are pleased that the European Parliament has decided to extend both the time available for the review of the PRIIP KID and the UCITS exemption period.
"It is essential that this time is used to develop and test solutions which ensure customers are provided cost and performance information that is reliable, clear and meaningful to help them make informed investment decisions.
"Regulators now have the opportunity to address the flawed methodologies of PRIIPs which are having harmful consequences on consumers' ability to save confidently. We have offered pragmatic solutions and it is now time for action."
The European Union's Packaged Retail and Insurance-based Investment Products (PRIIPs) regulation is aimed at helping retail investors better understand and compare the key features, risks, rewards and costs of different products through a short Key Information Document (KID).
This is a standalone, standardised document prepared for each investment, which can be up to a maximum of three sides of A4-sized paper.
The KID requirement currently applies to the vast majority of retail investment and insurance product providers, except for UCITS funds, which are currently exempt as they are required to produce a separate but similar 'KIID'. The initial plan had been to roll out the requirement to UCITS providers from 31 December 2019.
KID performance predictions have been described as "misleading" and the transaction costs estimations have already resulted in documents printed with negative costs estimations.
The Investment Association has been a big critic of the document, as has the Association of Investment Companies, which last month announced it would not be hosting the documents on its website. European trade body EFAMA has also be a fierce critic of the documents.
However, following proposals tabled by MEPs, the European Commission has finally accepted an additional two-year extension of the KID to UCITS.
Speaking at a public meeting of the Committee on Economic and Monetary Affairs (ECON) on Monday (19 November), a spokesperson from the commission said: "Clearly our goal is that [every retail product] should present a PRIIPS KID to ensure compatibility across all retail products.
"However, we understand the double burden for UCITS is not desirable.
"We can accept the proposed [time extension] considering that this is a step towards [all retail products being covered]."
The spokesperson added the EC will "quickly" meet with the national regulators of the European Union to discuss further changes to the PRIIPs requirements to "make them suitable for UCITS".
They added: "The acceptance of this proposal should be seen in the context of our long-term goals."
AIC calls for KID ban
Commenting on the European Commission's decision, chief executive of the AIC Ian Sayers called for KIDs to be suspended for all investment products.
He said: "The proposed delay lets the cat out of the bag. Though no doubt it will be dressed up rather differently, the real motivation for a delay is that KIDs are so toxic for retail investors that regulators fear it will damage the UCITS brand itself.
"As the flagship of European funds regulation, this is understandable but where does that leave investors in other funds? They have been misled by KIDs for nearly a year now. Don't they deserve the same protection?"
"Recent proposals for reform will not resolve these fundamental problems. Investors in non-UCITS funds should not be treated as second-class citizens.
"The KID should be suspended for all products to allow time to fix the problems once and for all. If KIDs are not good enough for UCITS investors, then they are not good enough for purchasers of investment companies."
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