As we announced in the beginning of the year, FCA together with HM Treasury had started consultations on replacing the existing UK PRIIP regime with a completely new UK retail disclosure framework. The existing UK PRIIP regime is one of the regulatory relics onshored during the Brexit process by cloning the relevant EU PRIIP regulation.
Reaffirming this process, on November 30, 2023, HM Treasury published a UK Retail Disclosure Framework Policy Note to outline the framework designed to establish a smarter regulatory framework for financial services tailored to the UK, together with the corresponding Statutory Instrument (SI) draft, outlining the basis of the new retail disclosure framework for “Consumer Composite Investments” (CCIs).
What does the new SI define?
The statutory instrument (SI) represents a replacement of the EU-PRIIPs Regulation, and establishes key definitions and provisions for the new UK-retail disclosure framework for CCIs. The CCis are the products in scope of the new UK disclosure framework (i.e. similar to the ‘PRIIP’ terminology used by EU). According to the document a CCI is broadly either:
An investment, including financial instruments or products with the potential for returns, excluding certain specified products.
An insurance product, encompassing products providing insurance coverage, excluding certain specified products.
The SI provides a detailed list of excluded products, such as non-structured deposits, pension schemes and others. It additionally clarifies the interpretation of terms like “retail investor” or “made available”. Activities in relation to manufacturing, selling or advising on CCIs to UK retail investors are “designated activates”, which fall under the scope of the new disclosure framework.
The policy note reaffirms that UCITS will continue to benefit from the existing transition period until the end of 2026, regardless of the adoption date of the new legislations, but should transition to the new rules no later than January 1st, 2027.
The SI also grants rulemaking and supervision powers to the Financial Conduct Authority (FCA). FCA is expected to set out the new rules for the retail disclosure framework. Notably this will contain also a “cost disclosure”. While there is no concrete information on the future disclosure rules, cleversoft expects those to match the proposals made by FCA in the relevant discussion paper DP22/6, published in the end of 2022.
The document emphasizes that it is a near-final version, subject to technical checks, and invites technical comments by January 10, 2024. While this draft SI is focused on setting out the scope, key definitions, and powers to the FCA, the government is expected to follow up with a separate stationary instrument on Designated Activities Regime (DAR SI) in early 2024. It will consolidate legislation as intended in the government’s Building a Smarter Financial Services Regulatory Framework: Delivery Plan.
What are the next steps?
The SI is expected to be legislated in 2024, subject to parliamentary availability. In addition to the draft legislation, however, the exact rules for the new disclosures would need to be finalized. While there is no concrete timeline for those, policy note suggests that those are to be expected “in due course”.
cleversoft regulatory watch will continue closely monitoring the next steps in the development of the new CCIs disclosure framework in UK and continue to inform you in due course. As part of our Compliance Commitment guarantee, we are happy to offer our customers continuously evolving regulatory services that take into account regulatory changes and new disclosure requirements.
We will be happy to guide and empower your regulatory compliance and offer disclosures for CCIs for all firms operating within the UK retail market. Thus, do not hesitate to contact us, we will be happy to answer your questions and concerns.