FCA chief executive Andrew Bailey says he is concerned about the new Priips regulation.
Speaking at the London Business School Annual Asset Management Conference yesterday Bailey said: “I want to be clear that I am concerned about Priips, and I know I am not alone.”
He added: “It carries a risk that it is leading to literally accurate disclosure, which is not providing useful context, and there is evidence that funds, for instance from the US, are withdrawing from Europe to avoid the burden. I have also heard concerns about performance projections. We all have to take this seriously.”
Trade bodies the Investment Association and Pimfa have both called for reviews of Priips rules, in particular the new Key Information Documents issued to investors.
Bailey said: “Some firms have told us they have concerns about this directly applicable EU regulation. In response, in January we published a statement clarifying some of our views on the KID.”
He added: “We will continue to engage with firms and their trade associations to consider how their concerns may be resolved so that investors get the full benefit of the regulation. We will also continue to work with the European Supervisory Authorities, and contribute to the European Commission’s post-implementation review of the Priips regulation.”
In the speech, Bailey also outlined challenges facing the UK asset management industy, including Brexit.
He said for asset managers the key issues relating to Brexit are delegation of activity, passporting of funds and segregated account arrangements for EU clients.
Bailey said: “I start from the position that today we have arrangements in place which work well for the benefit of all clients, and there is every reason for all parties involved to seek to put in place arrangements post-Brexit which preserve the benefits.”
He said that as asset supply chains are international funds should not be required to be managed solely in one jurisdiction.
He added: “A global macro fund, for example, may be located in one jurisdiction, while the management of investments held by the fund may be delegated to a number of jurisdictions, where local portfolio managers are closest to their markets.
“I do not believe it would be any more sensible to require a fund to be managed solely within its domicile. The truth is that delegation is a well-established global norm, underpinned by strong standards and regulatory cooperation.
“It is not dependent on EU membership. There is no reason to disrupt a system that clearly works effectively.”
He also warned that next to Brexit the second biggest problem the FCA faces is an aging population.
He said: “I quite often say that if I could put Brexit to one side, hypothetically to be clear, this is the biggest issue that we face at the FCA. And that is because it pulls together a number of very big trends, namely an ageing population, persistent very low or negative long-term real interest rates, and increased costs of care in old age, to name three.
“Asset managers are very much in the forefront of these issues because increasingly you are providing the means of saving for old age, and the choices for consumers are becoming more complex at a time when – over quite a long period now – the responsibility for those choices has been increasingly transferred to consumers.
“To give a prime example of an issue that we face, the growing number of people reaching retirement could lead to a shift in the balance of assets under management from accumulation–orientated products to decumulation products, including a variety of income drawdown strategies, some of which are likely to be relatively complex.”