FCA opens consultation on CCI disclosure requirements

The Financial Conduct Authority (FCA) opened a consultation on CCI disclosure requirements in December 2024 and intends to publish final rules in 2025¹. The consultation covers the new product information framework for consumer composite investments (CCIs), the name now given to the investments previously known as packaged retail investment and insurance-based products, or PRIIPs¹.

CCIs are investments sold to retail investors whose value fluctuates based on the performance of assets the investor does not directly own¹. A share in a FTSE 100 company is not one, but a FTSE 100 tracker fund is, because the investor's returns depend on all the companies in the index without the investor owning those shares directly¹. According to the FCA's Financial Lives survey, a quarter of UK adults hold a type of composite investment¹.

Under the rules in force until the new regime takes effect, providers must publish product information in a key information document (KID), covering matters such as the product's management fees, risk profile and future performance scenarios calculated under a standard methodology¹. This stems from EU regulations in force since 2018, which the UK adopted as an EU member¹. The EU had regulated some of these products since 2009 under the UCITS directive, with a key investor information document (KIID) that set out past performance rather than future performance scenarios¹. UCITS sold in the EU were initially exempt from producing a KID; that exemption ended in January 2023¹.

The KID has been contested. Investment firms claimed the methodology for calculating future scenarios overstated likely future gains, and EU regulators acknowledged it required certain products to report positive returns even in unfavourable scenarios¹. The Financial Times reported that one product linked to natural gas prices showed returns of more than 523 billion percent under a favourable scenario¹. The EU changed how performance scenarios and costs were calculated in 2021¹.

The UK's replacement framework has been built in stages.

In November 2024 the government also passed secondary legislation to exempt investment companies from reporting costs associated with their shares¹. Investment companies and trusts issue shares that trade on a stock market, and the share value reflects both the performance of the underlying assets and the company's own operational costs¹. Because the KID required those operational costs to be reported separately, critics argued it made investment companies double count their costs and could dissuade investors¹.

Why it matters for households

The disclosure document that comes with a fund, tracker or similar product is the main written information a retail investor sees before buying. The consultation concerns what that document must contain, so the changes will affect anyone holding or considering these products, a group the FCA's survey puts at a quarter of UK adults¹. The existing PRIIPs regulations continue to apply until the new CCI rules are in place, so the current KID requirements remain in force for now¹. The November 2024 exemption for investment company share costs took effect under secondary legislation passed that month¹.

What happens next

The FCA intends to publish final rules in 2025¹. In the EU, the European Commission published proposals to amend the PRIIPs regulation in 2023 following a wider review, and these were still being considered by the European Parliament and the Council of the EU at the time of writing¹. The UK's regime is expected to become more flexible, which brings potential risk and uncertainty for firms used to the prescriptive nature of the KID, and it is unclear whether the UK's approach will provide more product choice to consumers¹.