The UK Government and the Financial Conduct Authority (FCA) are working to reform capital markets. They aim to help retail investors make informed investment choices. A key aspect of this effort is replacing the EU-inherited consumer cost disclosure regulation. The goal is to create a new framework tailored to UK markets.

Treasury Proposes New CCI Framework

The Treasury has proposed replacing the current Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation with a new system called Consumer Composite Investments (CCIs).

Legislation will be introduced to grant the FCA the necessary powers to implement this change. The new CCI regime is designed to address industry concerns about current disclosure requirements, especially regarding costs.

The new disclosure framework is expected to be in place by the first half of 2025, pending Parliamentary approval and FCA consultations. The FCA plans to consult on the proposed rules for CCIs this autumn. This process will allow stakeholders to provide input to ensure the framework functions effectively.

Government Seeks Investment Trust Feedback

The CCI framework aims to help investors understand the costs and value of their investments. The Government and FCA are also seeking feedback from the investment trust sector on the existing cost disclosure requirements, which may affect these investment vehicles.

Investment trusts are significant in the UK, making up over 30% of the FTSE 250 and holding assets worth more than £260 billion. Factors such as investment performance and market sentiment can influence their valuations.

In response to industry feedback, the Government will legislate to exempt listed investment trusts from the current PRIIPs Regulation and amend other relevant laws. This measure will be temporary, as investment trusts will later fall under the new UK retail disclosure framework.

In light of these changes, the FCA will apply new forbearance measures. From September 19, it will not take action against investment trusts that do not comply with PRIIPs regulations until the new legislation is enacted. This is a temporary solution while long-term reforms are developed.