On 19 December 2024, the United Kingdom’s Financial Conduct Authority (UK FCA) announced an order instituting consultation for a new product information framework under CP24/30: A New Product Information Framework for Consumer Composite Investments (CCIs). The initiative proposes amendments to how investment products are presented to retail investors, focusing on enhancing clarity, flexibility, and consumer empowerment in investment decisions. This decision follows a commitment by the UK Treasury to replace European Union-derived regulations with a more tailored domestic framework. The current EU-based regulatory landscape, which includes Packaged Retail and Insurance-based Investment Products (PRIIPs) and Undertakings for Collective Investment in Transferable Securities (UCITS), criticised for its rigidity and inefficiency in delivering meaningful, comprehensible investment information to consumers, and, therefore by redefining the regulatory framework, the UK FCA aims to address these issues and align the new rules with the Consumer Duty introduced earlier in 2024.
The UK FCA’s consultation CP24/30 builds on its 2022 discussion paper i.e. DP22/6: Future Disclosure Framework, which explored the future of retail disclosure and sought feedback on replacing PRIIPs and UCITS disclosure requirements with a domestic regime. This was complemented by the UK Treasury’s 2024 publication on Retail Disclosure Consultation Response of the CCI regulations to replace these legacy requirements. Earlier, in July 2024, the UK FCA published the Call for Input: Review of FCA Requirements following the Consumer Duty, inviting responses on simplifying existing obligations. These consultations collectively shaped the current proposals under CP24/30, which explored the future of retail disclosure and sought feedback on replacing PRIIPs and UCITS disclosure requirements with a domestic regime. In 2024, the UK Treasury enacted the Consumer Composite Investments (Designated Activities) Regulations 2024 to replace these legacy requirements. The FCA’s new consultation sets the stage for a domestic framework to enhance consumer outcomes and foster innovation in financial services.
The current disclosure system, derived from European regulations, is viewed as overly prescriptive and inflexible. Many consumers find the documents confusing or overwhelming, hindering effective decision-making. By transitioning to a simpler, more flexible regime, the UK FCA aims to ensure consumers are presented with accurate, understandable, and broadly comparable information. It also seeks to encourage active consumer engagement with product information to make informed investment decisions and enable better comparability between investments, empowering consumers to select products that best meet their needs.
The UK FCA in Consultation paper CP24/30, outlined several transformative reforms to improve the product information landscape for retail investors. As per CP24/30, firms will no longer be constrained by rigid templates like PRIIPs and UCITS Key Investor Information Documents (KIIDs). Instead, they will have the freedom to design their disclosures using plain language, graphics, and digital enhancements. CP24/30 aims to prioritising good consumer outcomes. Disclosures will be simpler and tailored to individual needs, offering summaries of costs, risks, and performance that are easy to understand and act upon. Firms are encouraged to adopt modern communication methods, including layered disclosures and interactive dashboards, to improve consumer understanding and engagement. Standardised metrics for key areas like costs and charges will remain, allowing consumers to make meaningful comparisons between investment products. Finally, both authorised and unauthorised firms will be required to follow clear rules for preparing, presenting, and distributing product summaries. This includes mandatory reviews and updates to ensure the accuracy and relevance of information.
The UK FCA’s consultation CP24/30 will remain open for feedback until 20 March 2025. Stakeholders can submit responses through an online form or via email at cp24-30@fca.org.uk. Following this, the UK FCA plans to issue another consultation in early 2025 to address transitional provisions and consequential amendments. Final rules are expected to be published in a policy statement later in 2025. Once finalised, firms will have an 18-month transitional period to adopt the new regime. During this time, existing PRIIPs and UCITS disclosures will remain valid. Closed-ended investment companies, however, will have a shorter 12-month compliance window.
(Source: https://www.fca.org.uk/publications/consultation-papers/cp24-30-new-product-information-framework-consumer-composite-investments, https://www.fca.org.uk/publication/consultation/cp24-30.pdf)
