On 26 July 2018, the Financial Conduct Authority (FCA) published its call for input from industry stakeholders on their initial experiences with the new requirements imposed by the PRIIPs Regulation (Call for Input).
The call for input is available here.
The PRIIPs Regulation came into effect 1 January 2018 and applies to those who produce, advise on or sell "packaged retail and insurance-based investment products" (PRIIPs) to retail investors in the EEA, which includes investment funds, structured products and structured deposits, derivatives, certain non-pension annuities and certain insurance-based investment products.
This Newsflash sets out a high level summary of the input the FCA is seeking and the next steps that the FCA intends to take.
The key points the FCA is seeking input on are:
- the scope of the PRIIPs Regulation. The FCA is aware of continuing uncertainty in terms of which products fall within scope of the regime including investments in the European bond market and UK real estate investment trusts and foreign exchange contracts and is concerned about the impact such uncertainty may have on market behaviour;
- issues with costs disclosure. The Call for Input notes that the FCA has received questions about the technical calculations used for the costs disclosure prescribed by the PRIIPs Regulation and asks for input in particular where calculations have resulted in negative, zero or unexpectedly large transaction costs;
- concerns relating to risk disclosure. The FCA seeks input on any problems in relation to using the prescribed methodology for risk calculation (in particular whether the Summary Risk Indicator gives a misleading impression of the risks of investing); and
- practical problems with presenting performance scenarios. The PRIIPS Regulation requires those preparing the key information document (referred to as a "KID") for the product to present four possible scenarios for the performance of the product calculated in a specific way. The FCA asks for input on this particularly in light of concerns raised that the resulting information is potentially misleading for investors.
To view the full summary, click here.