The Association of Investment Companies will not be hosting the new key information documents on its website saying to do so would be irresponsible.
Since 1 January, Priips legislation has meant advisers have to publish a stand-alone, standardised KID to their client including performance scenarios, risks, and the total cost of products.
The AIC analysed KID data from 384 investment companies and 1,602 open-ended funds.
According to its research, 42 investment company KIDs indicate possible future returns of more than 20 per cent per year in the ‘moderate’ performance scenario.
Meanwhile, 45 investment company KIDs indicate possible future returns of more than 10 per cent in the ‘unfavourable’ performance scenario.
It also found that 129 investment company KIDs have a summary risk indicator of three (which must be described as ‘medium-low’ risk), while nine have a summary risk indicator of two (which must be described as ‘low risk’).
European guidance suggests the narrative that must accompany this disclosure should explain these ratings indicate investors have a low chance of losing money in poor market conditions.
The AIC says the methodologies and disclosures required by KIDs lead to misleading information and the FCA should take steps to prevent this being more widely distributed than necessary.
The organisation believes data providers and platforms should not extract individual figures from KIDs and present them in isolation where consumers do not have the benefit of the context.
It wants the FCA, data providers and platforms to also make it clear to investors that investment company KID disclosures are calculated on a different basis to those provided in open-ended funds’ key investor information documents and therefore are not comparable.
Ranking and comparison tables should also not show information from open-ended KIIDs alongside those of investment company KIDs.
AIC chief executive Ian Sayers says: “Having seen the reality of KIDs, we are in no doubt that many are misleading to investors and it would not be responsible for us to distribute them more widely. So we won’t be hosting them on our website.
He says: “I have a huge amount of sympathy for members and their managers who are required to produce this information knowing that it may mislead investors. If some of this information had been put into a financial promotion in the past, the distributor might well have faced regulatory sanctions, and rightly so.
Sayers adds: “I have heard people say that KIDs are not worth the paper they are printed on. Unfortunately, in some cases, it is even worse than this.”