The start of the Edinburgh Reforms in Action
Whilst not applicable to every regulated firm, the direction of travel has been sign posted.
Under the Edinburgh reforms the previous government proposed to update the UK’s retail disclosure regime, specifically, to replace the EU-derived Packaged Retail and Insurance-based Investment Products (“PRIIPs”) Regulation with a new framework for Consumer Composite Investments (“CCIs”). Under the new Labour government, the draft version of the UK’s Consumer Composite Investments (Designated Activities) Regulations 2024 (the “draft CCI Regulations”) was published on 10 October 2024, along with the explanatory memorandum.
The draft CCI Regulations define certain products as CCIs and specify activities relating to CCIs as “designated activities” for the purposes of Part 5A of the Financial Services and Markets Act 2000. They also provide the FCA with rule-making, supervisory and enforcement powers in this area. These regulations will come into force on the day on which the revocation of the UK PRIIPs Regulation comes into force.
FCA’s forbearance on UK investment trust disclosure requirements
On 19 September 2024, the FCA announced that UK-listed closed-ended investment companies, i.e. investment trusts, will be exempt from the existing UK PRIIPs regime. This was based on industry concerns that the current EU-derived PRIIPs regime does not work for investment trusts, specifically around cost disclosures.
FCA forbearance applied immediately, therefore UK-listed investment trusts no longer need to produce and maintain Key Information Documents (“KIDs”) from 19 September. To note, this is an interim measure. The forbearance will apply until investment trusts are covered under the incoming CCI regime.
The FCA acknowledged that firms may need to consider any other implications that their businesses may have for not complying with PRIIPs. In addition, the FCA’s updated forbearance statement makes it clear that firms must continue complying with other relevant regulations, including the Consumer Duty and product governance. For example, firms who deal with Retail customer should consider whether any additional information is needed to support retail investors as per PRIN 2.A.53R with the information to equip consumers with the information to make timely and properly informed decisions. This is irrespective of where the firm sits in the distribution chain.
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