New EU investment rules should be delayed due to 'alarming deficiencies'

New European investment fund rules designed to protect retail investors should be delayed for two years, a German trade body has claimed, due to "alarming deficiencies".

The latest "Priips" (packaged retail investment and insurance-based products) regulations force providers of mutual funds to tell retail investors how a fund may perform in a range of market conditions, rather than simply giving their historic performance data.

But the German Investment Funds Association (BVI) has said that the new rules most be postponed to January 2022, as they are in fact "misleading" investors.

"Investment funds are to set out three scenarios for an investment fund's performance – however on the basis of past data this would give rise to distortions," the BVI explained in a statement.

"For example after a bull run of several years on the stock market followed by plunging prices, the resulting scenarios will be too positive and take insufficient account of current negative developments."

Added to that, the regulations use a "not customary" method of calculating transaction costs, which can lead to incorrect or even negative costs displayed to the investor.

The UK's Investment Association has raised similar concerns.

“From a positive starting point of trying to make different products comparable, the Key Investor Document (KID) now makes it almost impossible to compare similar products," a spokesperson told City A.M..

"Performance scenarios and the way charges and transaction costs are presented are exceptionally difficult for customers to understand. Given the scheduled review, it is essential that regulators revisit these issues and ensure that the KID is not applied to investment funds in its current form."

The EU regulator, the European Securities and Markets Authority, said it maintained that its methodology was sound in the absence of "concrete evidence".

Let's block ads! (Why?)