FCA seeks views on retail disclosure in a world without UK PRIIPs

The FCA has kicked off discussions on the future disclosure framework for retail investments, following HM Treasury's announcement that it intends to revoke the UK PRIIPs Regulation as a matter of priority.

The Government had announced its intent to revoke the UK PRIIPs Regulation and remove the UCITS disclosure requirements as part of its "Edinburgh reforms" package, with rules on retail investment disclosure to be found primarily in the FCA Handbook in future. 

Future Disclosure Framework

The FCA's discussion paper (DP 22/6) invites views from across the market on how the FCA should take the retail investment disclosure framework forward. In particular, the FCA is seeking views on when, and in what format, information should be delivered to consumers and who should be responsible for this information. At present, the FCA is of the view that product manufacturers are best placed to prepare the disclosures given their understanding of the product, though is open to the view that it could be distributors instead. 

Presentation of disclosures is also a key focus, with the end of the prescriptive PRIIPs KID format an opportunity for "new and interactive approaches to design". This could include "layering", in which information provided to consumers becomes more detailed as the consumer progresses through the investment journey. The FCA notes that presentation rules could potentially interact with the Consumer Duty to ensure that disclosure provided is usable and and appropriate, although there would be flexibility for firms to disclose proportionately depending on the risks and complexity of the product. 

The FCA is also open to views on the right balance between flexibility and prescription for retail disclosure and, in particular, how far information should be comparable between products. This would cover costs and charges, risks and performance disclosures. 

ESG 

The FCA will continue to explore how the Sustainable Disclosure Requirements for products that have ESG claims fit into the wider disclosure framework, rather than as a discrete standalone document.

Consumer Duty

As the FCA notes, the forthcoming Consumer Duty and its emphasis on outcomes-based regulation will be a key influence in the design of the new retail investment disclosure framework. As with the Consumer Duty, the FCA's focus is to reduce rigidity and enable greater innovation in disclosure to the benefit of retail investors and firms. 

The FCA considers that this is now an achievable goal as the Consumer Duty will itself require firms to provide their customers with useful information that equips them to make effective, timely and properly informed decisions.

What's next? 

The FCA has not yet provided a timeline of when it will provide feedback to the discussion paper but it has indicated that it will conduct consumer testing ahead of a consultation paper. 

The discussion paper closes for responses on 7 March 2023, a few days after HM Treasury's consultation on the revocation of the UK PRIIPs Regulation closes.