Introduction
On 19th September 2024 the Financial Conduct Authority (“FCA”) announced its commitment to reform the retail disclosure requirements, moving away from the EU-inherited consumer cost disclosure regulations. The reform is being worked on alongside the Treasury and is currently at the early stages of development, with consultation expected in autumn 2024. Early expectations is for the new reforms to be in place in the first half of 2025, but this will be subject to relevant milestones being met on time.
The Reforms
The Treasury and the FCA are committed to updating the UK’s regulatory structure and to diversify away from inherited EU structures. The Treasury has previously consulted on the replacement of Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation with a new framework for Consumer Composite Investments (CCIs).
The aim of the CCI regulations will be to support investors’ understanding of what they are paying for and receiving through the distribution chain. Furthermore, the CCI framework will look to deliver a more proportionate and bespoke regulatory framework and address industry concerns raised regarding the previous PRIIPs arrangements.
Additional Investment Trust Action
Alongside the announcement of reform of the retail disclosure requirements, the government and the FCA are also looking for feedback from the investment trust sector in relation to the current cost disclosure requirements and the specific impact these disclosures are having on this specific sector. In the interim, whilst investment trusts will ultimately be included in the CCI regime, which is deemed to be better suited to investment trusts, and other investment vehicles, whilst ensuring consumers receive appropriate information to aide the decision-making process, legislation will be laid out by the government to exempt investment trusts from the current PRIIPs regulations alongside other necessary amendments to the onboarded EU laws.
It is worth noting that immediate forbearance has been provided by the FCA to the investment trust sector allowing closed-ended investment funds whose ordinary shares are admitted to trading on a UK regulated market or a UK multilateral trading facility to not follow the requirements of the PRIIPs Regulation and associated technical standards. It has been confirmed that the FCA will not take supervisory or enforcement action against investment trusts that use the PRIIPs exemption.
Moving Forward
The reforms detailed are at an early stage but it is worth noting that action could be rapid. It is expected that the first consultation on these reforms is to come in the next few months and planned adoption of new regulation in the first half of 2025. Therefore, firms must be prepared for the fast-paced regulatory changes and new rules in the next year.
How can Complyport help?
At Complyport we offer specialist compliance advice to help navigate the complex world of regulation. Our team of professionals provide a range of services to help firms stay ahead of regulatory demands:
- Compliance review of policies and procedures;
- Ongoing compliance support;
- Regulatory guidance; and
- Regulatory horizon scanning.
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