28 April 2020

EFAMA calls for urgent completion of PRIIP KID review to protect retail investors and support economic recovery

Ahead of the ESAs' final report on technical changes to the PRIIP Key Information Document (KID), EFAMA has issued a public statement reiterating that the current PRIIP KID remains fundamentally flawed and provides retail investors with misleading information

 

The industry body strongly believes an urgent review addressing these flaws is now both overdue and essential, and it is calling for all relevant parties to work together to find a practical and sensible way forward.

The COVID-19 crisis is resulting in unprecedented economic uncertainty and EFAMA says the asset management industry stands ready to play its part in the long road to economic recovery. To achieve this, a PRIIP KID that provides retail investors with the right information is ever more crucial in helping them to make informed investment decisions.

​In a letter shared this morning with the European Commission, MEPs, and the three ESAs, EFAMA is calling upon legislators to examine the final report carefully.

 EFAMA's statement highlights a number of key points including:

• Clear and relevant information on PRIIP KID will be essential for retail investors' participation in the post-COVID 19 recovery.
   
• The current framework is misleading for retail investors and therefore damaging for the industry and the UCITS brand.
   
• An urgent review of the current PRIIP KID is critical to protect retail investors interests, particularly in times of economic uncertainty. 
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1. ​Comparability at any cost is not the right solution - The fundamental problem stems from the PRIIP KID's inherent conflict to provide clear, fair and non- misleading information and comparability between widely different investment products. The pursuit of theoretical comparability has come at the cost of misleading information, adversely impacting the end investor.
    
2. Inclusion of past performance is paramount - Inclusion of past performance is paramount as investors need to know how a product has performed in the past. While it is not an indicator of future performance, historical data and standards allow for easy comparisons and show investors that a fund's value will fluctuate.
    
3. Appropriate scenario planning – Performance scenarios should not look to the future. They should instead provide information to retail investors on how a certain product will function given certain market conditions, based on historical observations. ​
    

​EFAMA's Director General, Tanguy van de Werve, commented:

“While the past few years have clearly shown there are no quick fix solutions to PRIIP KID, we remain confident that most issues can be resolved successfully. In times of unprecedented global economic uncertainty, it is imperative that all the relevant stakeholders work collaboratively to bring this to a positive conclusion. We simply must avoid continued misinformation to retail investors and damaging the UCITS brand by extending the currently flawed PRIIP KID. Time is now of the essence."

EFAMA will work continue to work closely with all relevant parties in the best interest of investors.

A full copy of EFAMA's statement is available here

EFAMA