On 19 September 2024 HM Treasury (HMT) and the Financial Conduct Authority (FCA) announced that they will exempt listed investment trusts from the existing PRIIPs regime in the UK. They have acknowledged that the current PRIIPs regime doesn't work for investment trusts, specifically around cost disclosures. Forbearance will be applied immediately, therefore listed investment trusts no longer need to produce and maintain PRIIPs Key Information Documents (KIDs). However, this is an interim measure and investment trusts will be covered under the incoming Consumer Composite Investments (CCI) regime.
HMT/FCA also gave some more detail on the timing of the CCI regime: we can expect the Financial Conduct Authority (FCA) Consultation Paper this Autumn, with the regime coming into place in H1 2025.
The announcement also reiterated that the themes of the new CCI regime will include:
- Value: HMT/FCA want the regime to support investors to better understand what they are paying for and the value they are receiving through the distribution chain; and
- Flexibility: HM Treasury HMT/FCA reiterate that the new CCI framework will be proportionate and will allow more bespoke arrangements.
Update as of 8 October 2024
On 30 September 2024, the FCA updated their statement to provide some further details in relation to their initial statement. The FCA's initial statement was very brief and raised a few questions for those who wished to take advantage of the forbearance. This was raised with the FCA, who have provided some further details in response:
The forbearance applies along the distribution chain. In short, the forbearance covers not just the manufacturers as initially stated. The forbearance also covers those who are distributing or marketing an investment trust and would otherwise have an obligation to provide a PRIIPs KID to retail clients, even if the manufacturer has ceased to produce these under the forbearance.
Firms must comply with other relevant rules and regulations and consider providing alternative product information. Firms must continue to comply with other rules / regulations, for example the Consumer Duty and ensuring communications are fair, clear and not misleading.
Where a KID is not provided due to the forbearance, the FCA expect firms to consider their approach to deliver "good outcomes" for retail clients. This may require the provision of additional product information and that firms in the distribution chain work together and share information to enable continued distribution of the investment trust.
Separately, we received a few questions regarding what we understood as being "Autumn 2024" for the purposes of the FCA's CCI consultation. While the FCA have not provided further detail, current expectations are that this will be towards the latter end of Autumn 2024 (i.e. November).
Furthermore, on 7 October, HMT published a draft version of the PRIIPs (Retail Disclosure) (Amendment) Regs 2024. These Regulations are the legal method by which investment trusts will become exempt to the UK PRIIPs Regulation and they also exclude costs relating to investment trusts that are UK listed from the cost disclosure requirements in the MiFID Org Regulation. Therefore, investment trusts that are UK listed, and firms investing in them, will no longer be required to aggregate, or otherwise report, the cost of manufacturing or managing shares in investment trusts that are UK-listed in this way.
The Regulations will come into force on the day after the day on which they are made.
