FCA confirm changes to PRIIPs regulation

Mar 29, 2022 12:00:00 AM

What has happened?

In March 2022, the FCA confirmed in its Policy Statement PS 22/2 certain changes to the Packaged Retail and Insurance-based Investment Products (PRIIPs) regulation to address the areas that potentially create the most harm to investors. These new requirements are one of the first examples of the FCA confirming the UK’s divergence from the EU’s financial services rules following Brexit.

What does the PRIIP Policy Statement focus on?

The FCA is changing the PRIIPs regulation after analysing the feedback received to its consultation CP21/23. It is:

introducing rules to clarify the scope of the PRIIPs regulation for corporate bonds, making it clearer that certain common features of these instruments do not make them into a PRIIP,
introducing interpretative guidance to clarify what it means for a PRIIP to be ‘made available’ to retail investors (including a maximum denomination of £100,000 to allow exclusion from this),
clarifying that the amendments to be made to the requirements in the PRIIPs regulation will not apply immediately to UCITS schemes and non-UCITS retail schemes, for which an exemption is available until 2026, and
amending the PRIIPs Regulatory Technical Standards to:
1. replace the requirements and methodologies (which are considered to be misleading) for the presentation of performance scenarios in the KID with a requirement for narrative information on performance to be provided,
2. address the potential for some PRIIPs to be assigned an inappropriately low summary risk indicator in the KID (the FCA has introduced rules to require PRIIPs manufacturers to upgrade a product’s SRI score when the score resulting from the application of the RTS methodology underestimates the level of risk), and
3. address concerns about certain applications of the ‘slippage’ methodology when calculating transaction costs

This will directly affect all firms manufacturing, selling, or advising on a PRIIP, including:

issuers of securities that are or may be classed as PRIIPs (including those that do not require Part 4A authorisations under FSMA),
life companies and discretionary investment management firms,
firms providing insurance-based investments services,
fund managers, wealth managers and financial advisers,
stockbrokers and other firms that provide advice to retail clients on funds,
issuers of structured products and derivatives, and
firms operating retail distribution platforms

The Handbook rules and RTS came into force on 25 March 2022. A transition period will be available until 31 December 2022, by which date firms must apply the new requirements.

How can we help you with PRIIPs regulation?

If you’d like to know more about how we can help you with your PRIIP arrangements, or with any other regulatory compliance issues, our specialist team is here to help.

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