The Personal Investment Management & Financial Advice Association (PIMFA) has reversed its position on the under-fire PRIIPS regulation by calling for its complete suspension until a full review can take place.
Earlier this week, Investment Week reported that European authorities had agreed to delay the extension of the PRIIPs Key Investor Document (KID) requirement to UCITS funds by another two years amid mounting pressure from the asset management industry, regulators and MEPs.
European regulators - or ESAs - will now set about a review of the regulation's implications and failings.
In October, PIMFA clashed with other trade bodies such as the Investment Association by calling for EU regulators to go ahead as planned with the extension of PRIIPs to UCITS funds.
However, in a statement on Thursday (6 December), PIMFA said the PRIIPs KID regime is doing investors "more harm than good" and the "ESAs' hastily-drafted proposals for amending KID performance scenarios are unlikely to improve the situation".
PIMFA said investors should not be provided with product information that is "at best, unhelpful and, at worst, misleading", and called for the PRIIPs regime to be suspended "until such time as a full and thorough review is completed".
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.
PIMFA's CEO Liz Field said: "We believe that the ESAs' consultation exercise is misconceived, a sticking plaster that can neither hide nor address the fundamental flaws of the regime as a whole.
"Virtually every aspect of the PRIIPs regime - scope, risk indicators, cost disclosures, access to third country products - is problematic and the ESAs' targeted review looking only at performance scenarios fails to acknowledge or address this.
"An immediate suspension of the PRIIPs regime would have multiple benefits - it would prevent investors from being misinformed by regulatory disclosures, it would save industry from spending time and money on ill-considered quick-fixes that do not work.
"It would [also] provide time for a thorough-going review of all aspects of the regime and it would enable a fresh start at some future point that regulators, industry and investors alike could support."
It echoes comments from the Association of Investment Companies (AIC), which has repeatedly called for a suspension of the application of the PRIIPs KID to non-UCITS funds.
Chief executive of the AIC Ian Sayers said: "The expected delay to KIDs for UCITS funds is welcome but leaves investors in non-UCITS funds out in the cold.
"Recent EU proposals to reform KIDs do not address their fundamental failings and will either do no good or make matters worse. Investors now face being misled by KIDs for years to come.
"As the EU appears unwilling or unable to protect non-UCITS investors, the FCA should take the lead and warn investors not to rely on these documents.
"It should ensure that the misleading information in KIDs does not pollute other areas of the market, for example by prohibiting it from being used in financial promotions and in search filters on websites."
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