December 2022 is being one of the most intensive months in preparation to all regulatory enforcements and changes starting from January 1st ,2023. Those apply for multiple regulations, incl. PRIIP, ESG & SFDR, among others. The UK PRIIP regime has also been affected, with new FCA requirements on the UK PRIIP KID disclosures to be enforced as of the start of 2023.
While many manufacturers are still finalizing the updates in relation to those requirements, FCA has launched a new discussion paper which suggests that not just further changes to the UK PRIIP disclosure are to be expected, but rather points out to a complete new “replacement” regime. The discussion paper relates to the consultation on PRIIPs launched by Treasury earlier in December.
The consultation paper from Treasury is stating the need of “revocation and replacement of the PRIIPs Regulation due to the clear issues within it” and seeks views on a new framework to replace it. As key problems with the existing PRIIP regime, Treasury lists the highly prescriptive nature, confusing information, high compliance burden which reduces the incentive of making financial instruments available to retail investors. One key element of the original PRIIP regulation is comparability, which in the view of Treasury is no longer an appropriate objective. Thus, the key elements that are proposed for the new framework are:
- Removing prescriptive requirements about format and presentation
- Removing the requirement of comparability, i.e. retail disclosure requirements should not seek to ensure that firms provide all of the information necessary for an investor to compare different products and come to a decision
- Integrating UCITS disclosure requirements (currently in UK UCITS KIID is replacing PRIIP KID at least by end of 2026) together the requirements in this new PRIIP framework
- Objective to improve access to a wider range of investment products (e.g. US Exchange Traded Funds (ETFs))
- The objective to allow innovative format and presentation, e.g. digitized disclosure formats
To achieve above, the government will empower FCA to design and deliver such new retail disclosure regime.
Treasury is requesting feedback to this consultation by the stakeholders, at the latest by March 3rd, 2023. Respondents can send feedback per email or post.
Clearly, FCA and His Majesty’s Treasury are working closely together, as the discussion paper from FCA follows directly the consultation and seeks views on how to design the new disclosure regime. Main discussion topics are: delivery, incl. when and how the information is communicated to a retail investor, presentation, i.e. how to make the disclosure “accessible and engaging”, and content, i.e. how to transparently and adequately provide information about the product, an investor is purchasing, incl. information on cost and charges, risk and performance. One major difference to the EU disclosure approach is the suggestion to integrate the ESG metrics or cross-reference the upcoming disclosure documents under the Sustainability Disclosure Requirements (SDR).
Comments and feedback on the FCA’s discussion paper are to be provided by stakeholders until March 7th, 2023. Similarly, to His Majesty’s Treasury consultation, the feedback can be provided per email or post.
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