Powers proposed for FCA to implement UK retail disclosure framework

Alongside Chancellor Jeremy Hunt’s Autumn Statement, delivered today (22 November), the government published a statutory instrument outlining key definitions, the scope of the new framework and the provision of powers for the FCA to make and enforce the rules.

The initial draft was published earlier in July, but the updated version covers the “near final version” of the rules, although the Treasury will continue to seek “technical comments” until 10 January 2024. The full legislation will be applied in 2024, subject to parliamentary time allowing.

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The instrument has changed the concept of a PRIIP, moving away from EU language to define products in scope of the new UK framework as Consumer Composite Investments, or CCIs.

PRIIPs were originally introduced in 2018 to standardise the disclosure and providing greater transparency to retail investors for certain products.

Following the Edinburgh Reforms in 2022, and Mansion House consultations throughout the year, the government elected to replace the PRIIPs with an overarching legislative framework, with firm-facing retail disclosure requirements being replaced with rules set by the FCA.

“The new UK retail disclosure framework for CCIs will be proportionate and tailored to UK markets, balancing support for UK businesses with ensuring retail investors receive appropriate disclosure to make informed investment decisions,” the policy note said.

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The Treasury said that, to maintain the “current scope of regulation”, the policy will grant the FCA “rule-making powers in relation to all persons engaged in providing CCI to UK retail investors”, with these additional powers set to be extended to both domestic and overseas unauthorised firms.

“This approach will ensure the new regime is tailored and proportionate to the UK market whilst enabling UK firms and funds to compete effectively on the global stage,” the Treasury said.

The Treasury said the FCA will be “provided with rule-making as well as certain supervisory and enforcement powers in relation to the designated activities (manufacturing, advising, or offering a CCI to a UK retail investor)”.

This will enable the regulator to maintain the application and enforcement of the current regulatory perimeter and “create tailored UK rules for retail disclosure without requiring all firms in scope of the activity to seek full FCA authorisation under the Regulated Activities Order”.

These new powers would be “more flexible and proportionate for firms”, it said, and will address “stakeholders’ key concerns” with the EU-inherited PRIIPs.

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In the same paper, the Treasury addressed the recent concerns regarding cost disclosure requirements for investment trusts, and said it would be granting the regulator the ability to reform cost disclosure requirements currently set out in the PRIIPs regulation, “enabling the delivery of a solution to these concerns”.

During the transition period from PRIIPs, the Treasury said that funds currently providing UCITS Key Investor Information Document (KIID) at the point the rules come into effect will be able to continue to do so until 31 December 2026.

“Funds may also choose to transition to the new disclosure requirements from the date that the FCA’s new rules come into effect,” the government said. 

“From 1 January 2027, at the latest, all funds (including those in scope of the Overseas Funds Regime) will be required to follow FCA rules under the new UK retail disclosure framework for CCIs.”