The Government and FCA announce plans to reform UK retail disclosure rules and will temporarily exempt investment trusts from assimilated EU law requirements.
The Government and FCA are committed to the ongoing reform programme to reinvigorate our 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 cost 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 to 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[2] to provide certainty for firms ahead of this legislation taking effect. 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.