An investment trade body has called for the new key information documents to be suspended calling them “systematically flawed” because of their reliance on past performance as a basis for future projections.
The Association of Investment Companies also wants the Treasury select committee to launch an enquiry into KIDs because of what it sees as the failure of policymakers and regulators to take action to protect consumers.
Since 1 January, Priips legislation has meant advisers have to publish a stand-alone, standardised KID to their clients including performance scenarios, risks, and the total cost of products.
The FCA has also raised concerned about the KIDs and has found some firms are not properly disclosing costs to investors as required under new Priips rules.
In July, the FCA published a call for input on the new Priips rules asking for feedback on the scope of the legislation and the contents of the Key Information Documents required.
In its response to the call for input, the AIC has urged the FCA to act quickly to protect consumers and warn them not to rely on KIDs when making investment decisions.
AIC chief executive Ian Sayers says: “As more experienced investors will just ignore [KIDs], it is the less experienced who will suffer the most. Telling investors that they can have high returns at medium-low risk in unfavourable markets is particularly toxic and entirely divorced from reality.”
He says: “If regulators continue to delay taking steps to protect consumers, then they should be held accountable if investors lose money as a result and feel they have been misled. It is nearly nine months since these documents were first produced and the reality of them was there for all to see, yet there has been no meaningful response from policymakers or regulators.”