FCA consults on CCI framework

The FCA is consulting on how it plans to build the new UK regulatory framework for Consumer Composite Investments, brought in to replace the EU PRIIPs concept. As we’ve previously reported, legislation creates a new regime covering open- and closed-ended investment funds, structured products, CfDs, derivatives and IBIPs.

The plans are based on:

• the need for clear investor documentation, delivered to make it as easy as possible for consumers to understand important points and make informed decisions;
• giving firms more flexibility in how, what and when they communicate – with a few detailed and more prescriptive requirements where it is necessary to ensure consistency or ability to compare;
• an approach that enables consumers to get the right information at the right time; and
• an outcomes focussed approach, in line with the Consumer Duty.

The regime will apply to those who manufacture or distribute CCs to retail investors in the UK, but not all will or need to be authorised under FSMA – instead the FCA is using its powers under the Designated Activities regime. It proposes changes to the Handbook by significant additions to the Glossary and new content in the Product Disclosure Sourcebook (DISC), which will apply to both authorised and unauthorised persons.

The FCA will be making changes to the PRIIPs requirements on:

• document and format – giving firms freedom to design what they think best and provide it early in the customer journey;
• cost information  – firms will explain fees using narratives and examples and describe what costs mean and their impact on returns in their own way;
• risk information – there will be a 1-10 risk metric based on product volatility with flexibility to change the indicator, and the introduction of combined risk-reward information to help consumers understand product features; and
• past performance – a graph covering a 10 year period where possible

In line with the Consumer Duty, the FCA sees specific roles and responsibilities for manufacturers and distributors and sets core product governance standards for unauthorised manufacturers.

The FCA wants to test its proposals before firming them up and expects to engage widely with stakeholders over the coming months.

Consultation closes on 20 March 2025.