Lawmakers in Brussels have issued an unusually blunt warning to top EU regulators that an overhaul of controversial rules designed to help retail investors choose suitable funds must be finalised by the end of January.

EU rules introduced in 2018, known as Priips, that apply to all investment products sold to retail investors have been heavily criticised for producing overly-optimistic projections for future returns and misleading information about costs.

But multiple attempts to rectify the problems with the maligned Priips regulations have failed to reach agreement. The ongoing divisions between regulators and lawmakers prompted Mairead McGuinness, the European Commission’s financial services commissioner, to set a new deadline of January 29 in an effort to solve the tortuous problem.

Ms McGuinness wrote recently to the EU’s three main financial regulators to demand that they agree the regulatory technical standards (RTS) that cover the presentation of costs and performance scenarios by the end of January.

Ms McGuinness said in her letter that the Commission was ready to “take all necessary steps,” in the absence of an agreement, effectively warning the regulators that they could lose control of the process.

“As the work is technically finalised, I trust that national competent authorities will be able to overcome the difficulties and will adopt the draft amending RTS,” she wrote.

But her intervention has triggered alarm bells at the European Fund and Asset Management Association (Efama).

The trade body is concerned that the Commission could introduce additional changes and that there would not be an opportunity for any further consultation between fund managers and policymakers.

Mutual funds, known as Ucits, were granted an exemption from the costs and performance reporting requirements that apply to other Priips. The exemption for mutual funds expires at the end of this year, raising the question of whether asset managers will have enough time to prepare new disclosure documents that comply with the revised rules.

“The timing now looks awfully tight. Will fund managers have enough time to implement the revised rules into Ucits key investor documents? We would prefer that the Commission would agree to another extension of the Ucits exemption for a further 12 months (until January 2023),” said Andreas Stepnitzka, senior regulatory policy adviser at Efama.

Changes already proposed by the regulators include new methodologies to calculate future performance scenarios to ensure retail investors are not provided with “inappropriate expectations” about future returns.

Flaws of the Priips performance projections were exposed by the market volatility triggered last March by the coronavirus pandemic. The asset manager WisdomTree was forced to close three leveraged oil exchange traded products (ETPs) last year after volatility destabilised crude prices. But losses over a single day were not supposed to exceed more than 8 per cent, according to the performance projections published in the ETPs’ investor documents.

The regulators have also proposed changes to the presentation of Priips costs data to help investors and financial advisers to better understand what they are paying.

The EU’s three main financial regulators, the European Securities and Markets Authority, the European Insurance and Occupational Pensions Authority and the European Banking Authority, declined to comment on Ms McGuinness’s letter.