The FCA said that firms' "inconsistent approaches" to the disclosure requirements set out in the PRIIPs regulation and recast Markets in Financial Instruments Directive (MiFID II), risked confusing customers. However, it said that it had found no evidence of deliberate non-compliance with the rules, which came into force in early 2018.
The FCA reviewed compliance with the MiFID II costs and charges disclosure rules by both asset managers, who manufacture investment products for onward sale, and retail intermediaries, who distribute products to consumers. It found that while awareness with the new rules was generally good, inconsistencies in the ways in which the firms in its sample had interpreted the rules made like-for-like comparisons of product costs and charges difficult.
The regulator has also been reviewing firms' early experiences of the PRIIPs rules and has been calling for input from firms. It said there had been a "high level of interest" in the exercise from firms. The FCA is meanwhile working with the EU to address firms' concerns about the PRIIPs regime, particularly around summary risk indicators and the performance scenarios.
Insurance and wealth management expert Tobin Ashby of Pinsent Masons, the law firm behind Out-Law.com, said: "It is probably not surprising that the FCA has identified in these reviews some inconsistencies in approaches between firms, who will have had to develop compliant approaches that align with their particular business and background systems to regulatory deadlines that have come thick and fast over the last 18 months".
"For PRIIPs, there is the added complication of the acknowledged issues, which the FCA is discussing at an EU level. The regulator is considering further guidance to ensure firms understand how to apply these regulations, but is expecting firms to focus on improving their compliance with PRIIPs to avoid the need for the FCA to take its own action," he said.
The FCA said that the evidence they received as part of their call for input in relation to PRIIPs suggested that inaccuracies were generally due to "poor application of the [PRIIPs] methodology".
In relation to costs disclosure, retail intermediaries told the FCA that they sometimes struggled to obtain all the data they needed from other firms to enable them to disclose all costs fully. The FCA said that all firms involved in the design, manufacture and distribution of retail products "need to work together to ensure all costs and charges are disclosed properly to customers".
FCA chief executive Andrew Bailey acknowledged that MiFID II and PRIIPs had "brought enormous change to how firms operate and the information they are required to give their customers".
"While awareness of the rules appears good, we found that firms take inconsistent approaches, risking confusion for customers, who may be misled about how much they are being charged," he said.
The FCA will "work with firms to help them ensure their reporting is accurate", and will also consider whether further guidance on compliance with PRIIPs is required, he said. However, he warned that the regulator would take further action if firms did not improve.