The FCA yesterday urged PRIPP providers to add explanations to product performance scenarios as part of the KID, if those scenarios look overly optimistic.
The Investment Association said: “Performance scenarios and the way charges and transaction costs are presented are exceptionally difficult for customers to understand. What is needed is an urgent, early review in order to fix these problems.”
Since the new rules arrived on 1 January, the Packaged Retail and Insurance-based Investment Products (PRIIPs) regulation from the FCA has required PRIIP providers to prepare and publish a Key Information Document (KID) - a stand-alone, standardised document - for each of their PRIIPs.
The Investment Association added: “We welcome the FCA’s recognition of the serious challenges emerging in the PRIIP Key Information Document (KID). From a positive starting point of trying to make different products comparable, the KID now makes it almost impossible to compare similar products.”
The FCA now requires firms to ensure that their communication with clients is “fair, clear and not misleading (Principle 7 of the Principles for Business), especially if the performance scenario of a PRIIP is “too optimistic”.