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FCA sets charges template for new EU disclosure rules

Regulator clarifies which products will fall under new disclosure rules and how charges should be disclosed


The FCA has told firms how they should disclose charges for products covered by forthcoming Priips regulations.

Priips, which is going to be implemented in January 2018, will apply to a wide range of firms, including banks, insurers, and investment managers, and aims to extend Mifid II standards on consumer protection to insurance-based investment products.

The FCA says the rules will apply to firms that give advice on, manufacture, or sell, Priips to consumers in the UK retail market and will apply the same day on which the regulation is expected to take effect.

Under the new rules, firms will be required to provide a consumer-friendly KID for each product, outlining its benefits, risks and costs.

What is covered

In a policy statement published today, which also includes feedback on a Priips consultation paper sent in July, the FCA has updated firms on which products will be considered under the Priips definition, although this depends on further clarifications from the European Commission or any of the European Supervisory Authorities.

Products and services which will not fall under the Priips definition will include investment trust savings schemes, Isas, pension products, including annuities, occupational pension schemes and individual pension products, assets that are held directly by the retail investor, such as corporate shares or sovereign bonds as well as traded life policies.

Meanwhile, non-Ucits retail schemes such as authorised unit trusts, open-ended investment companies and authorised contractual schemes, private equity schemes, derivatives, structured products as well as venture capital trusts will fall under Priips definition.

As suggested in its previous consultation and agreed by its respondents, the FCA has confirmed firms will not be required to provide a simplified prospectus for professional clients when they have the option to produce either a non-Ucits retail scheme KID or a KID for retail clients that invest in a NURS.

Charges countdown

The FCA has outlined in detail how firms should present and explain information on charges, past performance and risks.

A table should include an entry and exit charge, an ongoing annual charge as a single figure as well as extra information on any charges taken under specific conditions as well as the reason and timing for any changes.

Past performance, which is calculated on the basis of net asset value, should be presented as a bar chart going back to 10 years performance data and include extra statements on performance calculation, such as any fees included or excluded from the data.

The KID will also require a “simulated performance” record for the period before data was available on the product and only for specific cases “provided that its use is fair, clear and not misleading”, the FCA says.

Elsewhere in the disclosure rules document, the regulator said that the potential cost of compliance was outside of the scope of its work to introduce the EU requirements.

The FCA says: “Although we accept that the cost of producing and providing a KID will be significant for many firms, because it is directly applicable EU legislation the costs involved in complying with the regulation were not considered in the consultation paper. The CP focused only on the costs involved in complying with the revised FCA provisions.”



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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Stuart Duncan 2nd May 2017 at 2:01 pm

    This sort of thing just leaves me speechless.

    In that most EU members will likely ignore these requirements, why on earth are the FCA introducing something that will involve “Significant” cost when we are on notice to leave a few months after implementation?

    Just a bizarre waste of everyone’s time in my humble opinion and I speak as someone who voted to remain but was hopeful that we could dump some of this legislation now we are leaving.

    • Hampshire Yokel 2nd May 2017 at 2:24 pm

      I’d suggest that 15 is a bit more than ‘a few’.

      However, the frustration felt by financial firms at this sort of thing is understandable. The thing is, will the FCA continue to implement rules based on EU directives post Brexit, based upon ‘best practice’ and desired availability to cross border activities?

  2. So as I read it ‘…a consumer-friendly KID for each product, outlining its benefits, risks and costs.’ will be required for an OEIC or Unit Trust but not for an ISA or PPP/SIPP investing in exactly the same funds. Discuss.

  3. I’m a fervent Remainer, but I’m confused about this. Why bother with these rules if we are leaving?

    • I suspect that we won’t be writing a new set of rules and will just follow those already agreed by the EU Harry … (the rule book is just too big now and can you imagine the levy if it was rewritten, or where they would start?)…Can you remember when you got the PIA rulebook in a few volumes for your shelf … We need iCloud for the current one!! 🙂

    • The rules have successfully been negotiated to what the UK (FCA etc) wanted to get from this regulation.

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