Emma RadmoreFollowing on from the Treasury consultation on PRIIPs information requirements, FCA is now seeking views on when and in what format information should be delivered to consumers in a way that ensures what is provided is useful and supports the product buying experience. The discussion paper is focussed on PRIIPs and UCITS.
The paper notes that presentation is key, and is considering whether consumers might be best served by a “layering” approach, where firms include some information upfront and other information later in the process.
The paper notes that research FCA carried out a few years ago found that less than 3% of retail investors actually read regulated pre-contractual pre-fund disclosure documents, and the revocation of the PRIIPs Regulation announced in the Treasury document now gives FCA the opportunity to tailor a new, appropriate, disclosure framework. It believes the Consumer Duty should both help with this by introducing flexibility in its outcomes-focused principles which will in turn encourage innovation.
The paper seeks views on:
- delivery: FCA asks for views on timing of delivery of information, and whether it should prescribe this – FCA wants to ensure that consumers get information when they most need it. It also notes that it is not likely in the short term to be able to change the “durable medium” requirement and asks how much this will hinder firms. Further, it wants to future proof requirements and asks how firms envision distribution of retail disclosure changing over the next 5-10 years. It also asks who should be responsible for producing the disclosure and how it should be determined that a product is suitable for the retail markets and therefore disclosure is required;
- presentation: FCA seeks views on merits and drawbacks of different forms of presentation – including layering and whether it would be appropriate to move away from prescribing the length of a disclosure and instead consider applying character limits for specific information. Alternatively, is the Consumer Duty enough to put the onus on firms not to bury important information?
- content: FCA wants to understand how best it should balance flexibility with ensuring consumers get all appropriate useful information – and the extent to which information across products should be comparable, including in relation to the comparison of risk. It also specifically seeks views on the presentation of costs and charges, which it knows investors often do not understand. On performance, FCA says research has shown investors attach too much importance to past performance to the detriment of other metrics, so it seeks views on what the purpose of performance information is and how it should be communicated to retail investors based on product type.
FCA seeks views by 7 March 2023.