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Proposed changes to Consumer Composite Investment (CCI) Disclosures

As the UK transitions from EU-inherited financial regulations, the FCA is establishing a improved disclosure framework for CCIs. The proposed changes aim to enhance disclosure requirements and to empower retail investors, by providing them with clearer, more engaging, and decision-enabling information in regard to investment products, in turn boosting confidence and driving investment. Below, we delve into the fundamental proposals from CP24/30 and how Thistle Initiatives can support firms in adapting to these changes.

The new CCI Framework – the summary

To maintain industry standards with evolving financial needs, the Treasury has decided to replace the Packaged Retail and Insurance-based Investment Products (PRIIPs) and Undertakings for Collective Investment in Transferable Securities (UCITS) regime with a new, UK-specific approach. As outlined in CP24/30, the FCA is proposing a framework designed specifically for the UK market. This updated regime will cover a variety of investment products like structured deposits, securities embedding derivatives, and insurance-based investments, while excluding pension products and pure protection contracts. The aim is to create a more tailored and flexible system that truly serves both firms and investors.

The key objectives include:

• Flexible disclosures: moving away from rigid templates like the PRIIPs Key Information Document (KID), allowing firms to innovate in presenting product information
• Enhanced comparability: introducing standardised metrics, such as a 1-10 risk scale, alongside narrative explanations for costs and risks
• Empowering investors: providing accessible and visually engaging disclosures to help consumers make well-informed investment decisions

Key changes in practice

1. Simplified risk and reward information:

The proposed changes will integrate risk and reward details, offering a holistic view of product features. Firms will use a straightforward horizontal scale to show the level of risk, from low to high, and will add clear explanations about the key features of each product to help investors understand what they’re getting into.

2. Revised cost and performance reporting

The framework encourages the use of 10-year past performance graphs where data is available, alongside summarised 12-month cost disclosures. This shift ensures transparency and helps investors understand long-term value.

3. Digital-first approach

As technology advances, the CP23/40 encourages the use of layered disclosures and interactive dashboards to present information step by step as investors move through their journey. This approach not only makes complex data easier to digest but also allows distributors to include sustainability-related insights, ensuring alignment with ESG considerations.

4. Manufacturer and distributor responsibilities

Manufacturers will create core product details in formats that computers can easily process, making it simpler for distributors to personalise and refine how they communicate with clients. Working together across the distribution chain will be crucial to ensure the information shared is both accurate and clear.

Timelines and transitional provisions

The new framework is expected to launch by mid-2025, giving firms an 18-month window to adapt and make necessary changes. During this transition, existing PRIIPs and UCITS KIID documents will remain valid, ensuring continuity.

For closed-ended investment companies, which are currently exempt from PRIIPs rules, a shorter 12-month period will be provided to align with the new requirements.

Potential challenges for firms

These reforms represent a significant shift, particularly for firms that relied on prescriptive templates. Potential challenges may include:

• Adjusting Systems and Processes: Having to create adjustments to current systems and process in place may pose an issue.
• Engaging Investors: Balancing regulatory requirements with the need to create intuitive, engaging content.
• Collaboration across the chain: Ensuring seamless information exchange between manufacturers and distributors.

Navigating regulatory changes can be challenging, but Thistle Initiatives is here to offer expert support. We can offer bespoke advice in developing customised solutions for managing risk, cost, and performance disclosures, ensuring alignment with the FCA’s expectations as outlined in CP24/30. Thistle Initiatives can provide support ranging from creating compliant product summaries to adapting machine-readable formats and can ensure your documentation meets the new regulatory standards. We also offer training sessions that help assist your teams in getting up to speed with the new requirements, making the implementation process smoother.

For more information on how Thistle can assist, please get in touch with us today.