The Financial Conduct Authority (FCA) has proposed scrapping the requirement for packaged retail investment and insurance-based products (PRIIPS) providers to include performance scenarios in communications to clients.

The move follows feedback from firms that current methodology can produce misleading illustrations across almost all asset classes.

Under current PRIIPS rules, providers have to include performance scenarios in their key information documents (KIDS) with the scenarios calculated with specific methodologies which are laid-out in the PRIIPS rules.

In its latest consultation launched today, the regulator has proposed scrapping the performance scenarios and replacing them with a narrative of the factors likely to affect future performance. This narrative would also need to disclose the relevant index, benchmark, target or proxy and an explanation of how the product is likely to compare to it.

The consultation comes as part of the regulator’s consultations on post-Brexit divergence for UK firms.

The FCA said its rule change would give firms greater flexibility to ensure their communications meet the FCA;s test on the New Consumer Duty.

Sheldon Mills, executive director, consumers and competition, at the FCA said: “Exiting the EU has provided us an opportunity to quickly amend technical standards surrounding key information documents as we know that they are not fully achieving the intended aims. We want to ensure that consumers have what they need through transparent information and furthermore through the reduction of potentially misleading information being displayed.”

The regulator added that the Financial Services Act 2021 allows it to specify whether a product can be classified as a PRIIP under the PRIIPs Regulation as well as allowing the FCA to define was is meant by performance information.

The FCA plans to amend the PRIPPS rules by the end of the year with any changes made coming into effect from the start of next year.