A new UK retail disclosure framework is coming

Following on from its consultation response in July 2023, the UK Government has now published a draft statutory instrument (“SI”) (and accompanying policy note), granting the FCA the powers to construct and deliver a new UK retail disclosure framework for Consumer Composite Investments (“CCIs”).  This will replace the UK PRIIPs regime, and is intended to be “proportionate and tailored” for the UK market.

In summary, this SI would:

• replace the concept of a PRIIP and define products in scope of the UK framework as “consumer composite investments”;
• regulate manufacturing, advising and offering a CCI to a UK retail investor via the designated activities regime and provide the FCA with rule-making powers;
• restate FCA supervisory and enforcement powers on product intervention and suspension;
• set civil liability for pre-contractual disclosures, and
• retain the transition period for UCITS KIIDs.

Overall, the instrument scope of the regime appears to be very similar to the existing UK PRIIPs rules. However, the draft SI could result in a much broader population of firms captured as “manufacturers” of CCIs (in particular, because the draft SI partly borrows from the UK consumer duty definition of “manufacturer”). Importantly, the SI does not however prescribe the actual disclosure requirements, which the FCA will consult on in due course. 

A transition period is also being maintained for UK UCITS / NURS funds and EU UCITS funds that have been recognised in the UK. 

The accompanying policy note also suggests that the Treasury or the FCA will be making changes to the costs disclosure obligations in Articles 50 and 51 of the onshored MiFID II Org Regulation to accompany this package – which should help avoid duplication of retail costs disclosures. 

Next steps

HM Treasury intends to legislate during 2024, Parliamentary time permitting.

And what will the actual disclosure requirements look like? All we know at this stage is that the FCA will consult on their draft rules for CCI disclosures “in due course”. 

For a deeper dive into the details you can read our client note here