In a proclamation that would surprise no one, some product providers have raised concerns with the FCA that the "SRI might, in some cases, be misleading."
This may be because either the risk of the product does not appear to be adequately captured by the SRI, or the product has a significantly different SRI from other economically equivalent products.
The FCA has now asked for examples of products where the prescribed methodology for assessing and presenting risk leads to a counter-intuitive or potentially misleading SRI.
3) Investment providers struggle with calculators
The calculating transaction cost requirements under Mifid II are less prescriptive than under Priips in relation to the methodology for calculating these costs.
So the regulator found many are using the Mifid II methodology and while most funds were reporting small positive transaction costs, about 5 per cent of funds reported zero transaction costs, and a small number of funds reported negative transaction costs of less than minus 0.1 per cent.
This must have raised eyebrows at the regulator as they decided to test some calculations and "found significant calculation errors".
When these were corrected by the watchdog, the FCA found overall portfolio transaction costs for these portfolios were positive.
The regulator stated subject to the feedback it gets, and if appropriate, it will consider running workshops to support firms with their compliance activities in relation to these requirements.
However where the FCA spots non-compliance with the requirements, the regulator stated it will consider appropriate supervisory and enforcement action.
You have been warned.
4) Providers struggle to review performance
Firms are required to include appropriate performance scenarios in the Kid, together with information about the assumptions made to produce them.
One scenario simulates possible outcomes by considering the returns, and fluctuations of those returns, over the previous five years.
The moderate performance scenario is based on the average return.
The favourable and unfavourable scenarios reflect the ninetieth and tenth percentile returns, respectively, from the simulation.
The stress scenario is calculated according to a slightly different model.
The FCA revealed it is now aware of two issues about performance scenarios.
Examples where a product has experienced returns over the previous five years that are above the long-run average return, or what might be a reasonable expectation of future return, have been flagged with the watchdog.
In this case, the FCA has found the moderate performance scenario can give an unrealistic picture of the likely future return of the product and even the unfavourable scenario might also show an optimistic outcome.
Also, while the presentation of the scenarios, and the accompanying narrative, explains that they are not a forecast of future return, and that they are intended to be illustrative, the FCA now admits a consumer might assume that they are at least to some extent indicative of the potential return that might be derived from the product.
