On January 24, 2018, the U.K. Financial Conduct Authority issued a public statement on the Packaged Retail and Insurance-based Investment Products Regulation, which took effect on January 1, 2018.
The PRIIPs Regulation requires manufacturers of PRIIPs to prepare and publish a stand-alone, standardized Key Information Document for each of their PRIIPs. Those advising retail investors on PRIIPs, or selling PRIIPs to retail investors, must provide the retail investors with a KID in good time before the transaction is concluded.
The information to be included in a KID is set out in Regulatory Technical Standards and includes information on risks, performance scenarios, costs and other pre-contractual information. Some PRIIPs manufacturers have expressed concerns to the FCA that the "performance scenario" information required in the KID may in some cases (and for valid reasons) appear too optimistic and have the potential to mislead consumers. This would contravene the regulatory obligations of those manufacturers to act in the clients' best interests and to ensure communications are fair, clear and not misleading. The FCA has confirmed that, where a PRIIPs manufacturer has concerns that the "performance scenario" information might be misleading, the manufacturer may provide explanatory materials to put the calculation in context and set out its concerns for investors to consider. The FCA also invites sellers of, or advisers on, PRIIPs to consider how best to address similar issues, for example by providing additional information in communications.
The FCA statement is available at: https://www.fca.org.uk/news/statements/statement-communications-relation-priips.
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