FCA confirm amended UK-PRIIPS regime

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:

A) Scope

• 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

C) Miscellaneous

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.