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20th July 2016

FCA Consults upon PRIIPs Regulation

The FCA launched a new consultation this week relating to the disclosure rules that will be affected when the PRIIPs Regulation comes into force in December.

At the end of the year on 31st December 2016, the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation takes effect across all member states within the European Union.

Since the UK regulator has informed, financial services regulation post-Brexit will continue on as planned and thus, this includes preparation for PRIIPs KID Regulation and its implementation.

PRIIPs Regulation – Retail Disclosure Documents

The new PRIIPs Regulation is aimed at helping retail investors better compare in-scope products and make better-informed decisions. Thus, the PRIIPs Regulation will require affected firms to plan and make changes to their retail disclosure documents and related processes. Once in effect, the PRIIPs Regulation will require these firms to publish and provide a Key Information Document (KID) for each manufactured Packaged Retail and Insurance-based Investment Product (PRIIP).

PRIIPs KID Content:

The exact content and subscribed layout of the Key Information Document, as we have spoken about previously in preparation for PRIIPs KID Regulation, is specified in the PRIIPs Regulation and its related Regulatory Technical Standards (RTSs).

In summary, each KID should be no longer than three pages and it must contain specific information that is presented in a pre-determined sequence under sections such as:

• What is this product?
• What are the risks and what could I get in return?
• What happens if [name of the PRIIP manufacturer] is unable to pay out?
• What are the costs?
• How long should I hold it and can I take money out early?
• How can I complain?
• Other relevant information (This section will signpost to other relevant information, such as where a prospectus may be found (the KID cannot signpost to marketing material).

PRIIPs Regulation: Affected Firms

The PRIIPs Regulation will place directly applicable legal requirements upon all those who manufacture, advise on or sell PRIIPs within the EU.

This means that it will apply directly to such firms or persons that are authorised by the FCA as well as applying to those that may not need FCA authorisation.

Therefore, the PRIIPs Regulation will affect firms that manufacture, advise on, or sell retail investment products that fall within the scope and firms will need to produce, publish or provide KIDs for packaged retail products, such as funds, insurance-based investments, structured products, derivatives, and investments issued by some special purpose vehicles.

What is the consultation on?

The PRIIPS Regulation will be directly applicable to firms in all EU member states. Thus, to avoid conflict or duplication with existing disclosure rules by the PRIIPs Regulation the FCA is now consulting upon their proposed changes to the disclosure section of the UK Handbook.

In addition, the FCA looks to clarify how the UK disclosure rules apply in addition to the PRIIPs Regulation requirements, such as where the FCA rules implement EU legislation that “co-exists with the PRIIPs regulation”. For example the disclosure requirements implementing the Markets in Financial Instrument Directive (MiFID), will continue to apply, thus for many products, the KID (once PRIIPs Regulation is in force) will not be the only information or disclosure document that a customer may need to receive.

This week’s FCA consultation paper (CP16/18) allows for a two month consultation window with responses to the consultation required by 19th September 2016. Once responses have been received, the regulator will expect to publish the final rules within a Policy Statement in November to give firms as much time as possible to apply the new rules in time from 31st December 2016.

PRIIPs Regulation Support:

To find out more about the content, presentation and calculation of content to be included within a PRIIPs Key Information Document (KID) or to discuss any questions you may have about how the new PRIIPs Regulation will affect you, please contact our experienced regulatory consultants.

Related Reading

• Preparation for PRIIPs KID Regulation
• CP16/18: Changes to disclosure rules in the FCA Handbook to reflect the direct application of the PRIIPs Regulation

FCA Consults on Disclosure Rules for PRIIPs Regulation