A visitor passes a sign in the lobby of the European Securities and Markets Authority's (ESMA) headquarters in Paris, France, on Thursday, June, 20, 2013. French gross domestic product will probably drop this year after stalling in 2012 as households trim spending and companies slash investment, national statistics office Insee predicted. Photographer: Balint Porneczi/Bloomberg
Esma said regulators would 'consider additional guidance' © Bloomberg

European regulators stand ready to provide “additional guidance” to investment managers after the publication of wildly misleading performance projections by some product providers, which suggested savers could earn annual returns of more than 1m per cent.

Providers insist they were left with no choice but to publish the misleading data but some managers fear they may be exposed to legal action for mis-selling.

European rules introduced this month help retail investors understand and compare the key features, risks, rewards and costs of many investment products sold by asset managers, banks and insurers.

Some providers of Priips — packaged retail investment and insurance-based products — have had to publish absurd numbers for the newly required future performance scenarios. These outline a range of returns that an investment might deliver in different market conditions.

Annualised returns of more than 523bn per cent could be delivered for a three-times leveraged note linked to US natural gas prices under a favourable investment scenario, says a key information document published on the website of ETF Securities, the London asset manager.

Other short-term investment products where the recommended holding period is a single day could generate annualised returns of more than 1m per cent.

The European Securities and Markets Authority, the pan-EU financial regulator, said the data were a “misinterpretation” and did not reflect the intended approach. It said regulators would “consider . . . additional guidance as issues arise”.

Other serious problems have emerged with the new requirements for managers to disclose data on transaction costs incurred for buying and selling securities held in an investment portfolio. Many asset managers, including BlackRock and Legal & General Investment Management, have provided distributors with data suggesting that some of their funds will incur negative transaction costs.

Trade associations representing fund managers and issuers of structured products in Europe have asked regulators — who were due to meet on Friday — for a review.

Alan Miller, co-founder of SCM Direct, a wealth manager that has campaigned for improvements in fee disclosure requirements, said he believed many investment managers and platform operators were “flagrantly breaking the law” and that regulators should use all their powers to ensure compliance.

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