Press release: Reforms to Financial Services retail-disclosure requirements
The Government and Financial Conduct Authority (FCA) are committed to
the ongoing reform programme to reinvigorate the UK’s capital markets.
Ensuring retail investors can make informed investment decisions is an
important part of ensuring healthy capital markets. As part of this,
the Government and FCA are committed to replacing EU-inherited
consumer disclosure regulation with a new framework tailored to UK
markets and firms.
The Treasury consulted on replacing the
EU-inherited Packaged Retail and Insurance-based Investment Products
(PRIIPs) Regulation with a new framework for Consumer Composite
Investments (CCIs). HM Treasury will lay legislation as soon as
possible to provide the FCA with the appropriate powers to deliver
this reform. The new CCI regime will deliver more tailored and
flexible rules which will address concerns across industry with
current disclosure requirements, including for costs.
The
UK’s new retail disclosure regime is expected to be in place in H1
2025, subject to Parliamentary approval and the FCA consultation
process. The FCA intends to consult on proposed rules for the CCI
regime this autumn.
The UK’s new framework for CCIs will
support investors to better understand what they are paying for and
the value they are receiving through the distribution chain. The FCA’s
consultation process will provide an opportunity for a full range of
stakeholders to provide feedback on the new regime, to ensure it works
as intended.
The intent is that the new CCI framework will be
proportionate and will allow more bespoke arrangements to address
concerns that have been raised with the current PRIIPs framework.
The Government and FCA also welcome the feedback from the
investment trust sector regarding the operation of current cost
disclosure requirements and how they might be impacting the investment
trust sector specifically.
Investment trusts are a well-
established type of investment vehicle in the UK representing over 30%
of the FTSE 250 and investing in over £260 billion in assets in total
[1]. They can be a valuable source of investment funding for both
conventional and emerging asset classes. The valuations and discounts
of investment trusts may be influenced by many factors, independent of
regulation, including investment performance, overall market sentiment
and the interest rate environment.
In response to the
feedback from the sector, the Government will lay legislation to
exempt listed investment trusts from the current PRIIPs Regulation, as
well as make other necessary amendments to other EU-assimilated law.
This approach is intended as an interim measure, and
investment trusts will be included within the scope of the future UK
retail disclosure framework. The proposed new CCI regime is intended
to better cater for a variety of products and investment vehicles,
including investment trusts, while still ensuring consumers receive
appropriate information to allow them to make meaningful choices
between investment opportunities about composite consumer investments.
In light of this announcement, the FCA will immediately apply
new forbearance to provide certainty for firms ahead of this
legislation taking effect. Read the FCA forbearance statement. From 19
September until the legislation to amend the PRIIPs regulation for
investment trusts comes into force, the FCA will not take supervisory
or enforcement action if an investment trust chooses not to follow the
requirements of the PRIIPs regulation and associated technical
standards, and/or the requirements of Article 50(2)(b) and Article 51
of the MiFID Org Regulation. This is an interim measure, pending
longer term reform.
[1] 92 of the FTSE 250 are Investment
Trusts.