Responding to the FCA’s ‘PRIIPs - Proposed scope rules and amendments to Regulatory Technical Standards consultation’, PIMFA has called for the Regulator to take a more radical approach regarding the PRIIPS regime, which has applied since January 2018.
Concerns that have been continually raised by PIMFA’s members include the fact that the all-encompassing nature of the PRIIPs Key Information Documents (KID) fails to reflect the way that most consumers approach investment, and that the vast bulk of PRIIP disclosure material is ignored.
PIMFA believes that following Brexit, it is now the right time for the Treasury and the FCA to commit to a timeframe for a review that considers whether a PRIIPs-style approach to product disclosure - covering everything from the most vanilla of funds to the most complex derivative products - is the right one, or whether information could be provided to investors in more concise and effective ways.
PIMFA further argues that piecemeal amendments that only tackle the very worst aspects of the regime as they become apparent, do not constitute an approach that is in the best interests of either consumers or the industry.
While some of PIMFA’s concerns have been addressed by the FCA’s proposals, following amendments made to the on-shored PRIIPs Regulations by the Financial Services Act 2021, the industry at present is still left to operate a set of requirements that are largely unworkable and fail to provide consumers with clear information.
The Treasury’s previous statement that amendments to the Financial Services Act thus far, “target only the most pressing concerns with the PRIIPs Regulation” and that in the longer term, it intends to conduct a more wholesale review of the disclosure regime for UK retail investors, are welcome.
But in the meantime, the dubious quality of KID disclosures and the fact that KIDs have failed to meet their transparency and comparability objectives, makes the question of whether the regime should continue to operate one that should be addressed with some degree of urgency.
Liz Field, Chief Executive of PIMFA, commented: “We know the FCA does not currently have the ability to institute a root and branch reform of the PRIIPs regime, however necessary this may be, and we welcome the Regulators’ recognition of the flaws of the regime, as well as indications of future action to address them.
“But that still leaves our members, and the industry at large, to operate a set of requirements that have failed to provide investors with clear, comprehensible and worthwhile disclosures since their introduction.
“Although many of the amendments proposed in the current consultation are not necessarily objectionable of themselves, they are very clearly “sticking plasters”, aimed at providing short-term relief from the most problematic elements of the regime without addressing its overall lack of cogency and effectiveness. This is why we are calling for a fundamental review of the entire PRIIPs regime as soon as possible.”
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