The Association of Investment Companies (AIC) has criticised the Financial Conduct Authority (FCA) and the UK government for not taking prompt action to revamp the Key Information Documents (Kids) system.
The AIC said that the Packaged Retail and Insurance-based Investment Product (Priips) disclosure regime needs changing, especially when it comes to providing clients with Kids.
This is because the association believes the documents “overstate potential performance and understate risks which can mislead consumers about the returns that they could receive”.
But after a review of the regulation was commissioned in July 2020, the AIC argued that meaningful change needs to happen soon.
The trade body said that “tinkering around the edges” will not solve “fundamental flaws” and that Kids should be suspended and a “meaningful review announced” during chancellor Rishi Sunak’s budget at the end of October 2021.
‘Enough is enough’
Richard Stone, chief executive of the AIC, said: “We understand that the past 12 months have been very challenging for the government and regulators but it’s time to make meaningful changes to Kids.
“Enough is enough. The treasury committed to a wholesale review of the regulation in July 2020, and we are still waiting for progress. Given the problems with Kids, which have been widely recognised ever since their launch four years ago, it’s clear the FCA’s proposals don’t go far enough.
“Swapping performance scenarios for narratives and allowing Kid producers to manually upgrade their risk ratings won’t address the fundamental flaws with these documents.
“The FCA acknowledges the harm Kids pose to consumers. Rather than tinkering around the edges, the Treasury should conduct a full-scale review of the Priips regulation. Until that happens, Kids should be suspended.
“Far from helping people make better informed decisions, these documents are misleading investors and distorting the market, with Ucits funds still producing an entirely different disclosure that is not comparable. We call on the chancellor to announce a more meaningful review alongside the autumn budget.”
