Eleven French financial associations, including the French asset management association AFG, have issued a statement regarding the evolution of Priips’ draft regulatory technical standards (RTS).
French consumers’ protection and professional associations call the European institutions to improve the quality of the information in the Key Information Document (KID).
“We believe the PRIIPs Regulation, which intends to enhance the transparency of investment products for retail investors, is a key tool to rebuild confidence in financial markets and to channel more retail savings towards investment solutions,” the eleven associations said.
They have recognised positive changes have been proposed by the European Commission in the latest draft amended RTS such as the extension of the exemption for Ucits in the context of PRIIPs offering a range of investment options (MOPs) in conformity with level 1, and the removal of the historical bias into the performance scenario calculation methodology.
But the French financial industry is “still very worried” regarding the rules defining the content of Priips’ key information document.
The associations considers that the current rules set for the redaction of Priips’ KID will not achieve to give to investors meaningful, comprehensible and comparable information.
“The recent absence of consensus at the ESAs level on the RTS in progress demonstrates how key aspects of Priips RTS are still unsolved and that alternative solutions should be explored before any implementation. Moreover, other key practical aspects for stakeholders are still ambiguous or pending in the proposed RTS, such as the application scope of the Regulation (stocks issues, the treatment of derivatives in particular those used for commercial hedging only), the absence of definition of an investment option underlying a MOP (e.g. mandates issue), …,” they stated.
The eleven French financial associations said Priips KID methodologies remain highly questionable, quoting as an example the calculation method for the performance scenarios and “in particular for the “moderate” one, which might not truly reflect what the investors could expect as returns and would not discriminate between different asset classes.”
Another question mark for them is that of the absence of past performance mentioned in the KID. The associations argued past performance of a fund is still an “extremely valuable piece of factual information for investors in their investment decision.”
“Indeed, investors want to know whether the product they intend to invest in has made any money or not before buying it. It is therefore very difficult to understand why investors should be deprived from such information in the Priips KID,” they added.
The French financial associations called for a simplification of the treatment of MOPs, by allowing the MOP manufacturer to draft one generic KID for the MOP, describing the overall PRIIP, and to refer to specific information, on the underlying investment options, that relates to these underlying options only.
“We also believe that the proposed transaction costs calculation methodology, including market movement in the transaction cost and mixing transaction costs with best execution duties, will generate purely fictitious figures and even negative costs.
“This information will make the investor believe he will make money, when he actually needs to pay for the brokerage fee for instance. A simple way to avoid displaying such negative and misleading figures, would be to apply to all Priips the current methodology imposed by the draft level 2 RTS for new Priips,” the associations pointed out.