The new UK retail disclosure framework: Policy Note and Draft Regulations
24 Nov 2023
2 min read
HM Treasury has published a Policy Note on the UK’s new retail disclosure framework for Consumer Composite Investments (CCIs) alongside a near-final draft of the Consumer Composite Investments (Designated Activities) Regulations 2024.
The draft SI will replace the retained EU law PRIIPs Regulation and set out provisions to facilitate the creation of a new UK retail disclosure framework for CCIs. As previously announced, the new framework will be delivered using the Designated Activities Regime (DAR) introduced by FSMA 2023. However, this specific SI is still required to set out the scope, key definitions and rule-making powers provided to the FCA by HM Treasury in respect of CCIs, as well as certain supervision and enforcement provisions.
The Policy Note states that the FCA will set out further detail on their proposed rules for the new retail disclosure framework, including cost disclosure, in due course. A further draft SI regulating certain common aspects of designated activities is expected to be published for technical checks early next year, and is expected to contain a set of cross-cutting supervision and enforcement provisions that will apply to all designated activities.
Key provisions
In the meantime, the Policy Note describes the key provisions of the draft CCI SI, which:
- Updates the concept of a PRIIP, moving away from EU language to define products in scope of the new UK framework as CCIs.
- Establishes the scope of the new framework by defining the designated activities which will require firms to provide disclosure to UK retail investors. The draft SI defines manufacturing, advising and offering a CCI to a UK retail investor as designated activities under the DAR.
- Provides the FCA with powers to make and enforce rules in respect of the relevant designated activities (i.e. manufacturing, advising, or offering a CCI to a UK retail investor).
- Sets out firms’ civil liability regarding disclosure provided to retail investors.
- Restates the FCA’s existing supervision and enforcement powers, which will be maintained under the new framework and modified to reflect the UK-specific context of the new framework.
- Maintains the transition period for funds currently providing the UCITS KIID.
Next steps
The draft SI is considered near-final, with the policy approach settled, but HM Treasury states that it welcomes any technical comments on the draft SI by 10 January 2024. Firms will now await the FCA's consultation on their draft rules to establish the underlying substance of the new regime.
The new UK retail disclosure framework for CCIs will be proportionate and tailored to UK markets, balancing support for UK businesses with ensuring retail investors receive appropriate disclosure to make informed investment decisions.