Speaking at International Adviser’s Future Advisory Forum in London on Thursday, Simon Willoughby, head of proposition at Axa Wealth International, said that Ailo had written to the joint committee of the European supervisory authorities (ESAs) asking it to remove clause 14 from the PRIIPs regulation before it comes into force on 1 January 2017.
“I had a hand in the letter that went to the ESAs, suggesting that clause 14 needs to be taken out because it is unworkable.
“Clause 14 is for open architecture products that would require us to provide KIDs on every fundlink. It’s a nightmare,” he said.
Describing the requirements as “excessive”, Willoughby, who is the chairman of Ailo’s distribution committee, pointed out that this particular section of the legislation “has no basis in the underlying law” – originally proposed so that consumers could compare retail savings and investment products.
Efama calls for Priips delay
Willoughby’s comments come just weeks after the European Fund and Asset Association (Efama) wrote to the EC urging it to delay the introduction of the Priips framework until 2018.
The letter, signed by a number of other trade organisations such as Insurance Europe and the European Banking Federation, argued that as the final regulatory technical standard (RTS) will not be released until the third quarter of this year, this gives firms very little time to comply by the 31 December deadline.
“This timeline is simply unrealistic. We cannot stress enough the considerable operational challenges that Priips manufactures need to overcome in order to provide the Priips KID to retail investors,” said the statement, published on Efama’s website.
As proposed by the ESAs, the industry could not simply rely on the final draft of the RTS, stressed the trade body, as not only could it be rejected following the last consultation period, but it also fails to answer a “number of fundamental questions”.
Priips
The EU opted to introduce legislation governing packaged retail investments and insurance-based products (Priips) after a review by regulators in 2008 found an ‘information gap’ between distributors, manufacturers and consumers which made it difficult for would-be buyers to compare products.
At the heart of the regulation is the key information document (KID) – a simple, easy-to-understand guide of no more than three pages, inspired by Ucits KII information sheet.
Fundamental issues
In December last year, International Adviser’s technical briefing by Mark Maguire, head of actuarial and product development at SEB Life International, threw up a number of issues the impending Priips regulation has failed to address.
He said: “The most significant issue identified so far is how to produce a KID for products with multiple fund options – known under Priips as multiple option products (MOPs).
“The challenge for MOPs is clear: how do you provide all the required detail for a product in three pages when that product may have hundreds of funds? The problem is even greater when you consider open-architecture portfolio bonds where there may not even be a defined list available. What about portfolio bonds where there is a discretionary fund manager appointed?”
Maguire added that although the ESAs are well aware of the problems, they have yet to put forward a solution.
“The leading candidates are either a generic KID with an average assumed fund, or a special MOPs KID that would then need to be supplemented with further KIDs for each fund,” he said.
