Today, the UK Financial Conduct Authority published a policy statement confirming their local packaged retail investment and insurance products (PRIIPS) framework.
This includes the final scope and amended rules covering the pre-contractual Key Information Document (KID) disclosure facing retail UK investors. Most of these were previously outlined as “targeted amendments” by the FCA last summer, to “address the areas of the [EEA] Regulation that pose the most harm to consumers”.
The FCA PRIIPS rules apply from today, with a transition period deadline set for 31 December 2022.
In the meantime, most EEA regime divergencies are now confirmed and need to be addressed by UK / EEA market stakeholders within the time available.
Here is a high-level summary of the FCA UK-PRIIPS policy statement:
- UK-UCITS: must continue to provide a Key Investor Information Document (KIID) until 1 January 2027.
- Non-UCITS retail schemes (NURS): can now opt to a produce either a NURS-KII (previously considered equivalent to a KIID) or a UK-PRIIPS KID (i.e. as defined in this latest policy statement).
- EEA-UCITS: those registered within the Temporary Marketing Permissions Regime (TMPR) must continue to provide a UCITS KIID (i.e. for all investors).
NB: Crucially, no decision has been taken on whether the FCA will accept the EU-PRIIPS KID to be issued by EEA firms from 1 January 2023. The UK Treasury will “determine in due course what the future disclosure requirements for EEA UCITS will be”.
B) UK-PRIIPS KID template
The FCA have confirmed key changes to the UK-PRIIPS KID template (depicted in Annex I, p.15-16):
- Narrative information on performance will replace the EU’s detailed performance scenarios methodologies and presentation requirements
- Summary risk indicators (SRI): can be upgraded to avoid “inappropriately” low scoring
- Transaction costs: revised ‘slippage’ methodology rules to “improve accuracy”:
- treatment of anti-dilution
- calculation of over-the-counter (OTC) transactions in bonds
- calculation of costs of index-tracking funds
- Past performance will remain excluded from the UK-PRIIPS KID
The FCA makes no mention of annual regulatory filing in their policy statement. Presumably, this will remain:
- Obligatory for all UK-UCITS KIIDs (produced by EEA and UK firms) until 2027
- Not required for UK-PRIIPS KIDs (as per current FCA regime) for the duration.
Finally, the FCA confirmed their policy is a “first step” and at some stage, the UK Treasury will conduct a “holistic review of the PRIIPs regime”, locally.