UK FCA publishes final rules on Consumer Composite Investments regime

The scope of the new CCI regime is set out in legislation. A CCI is an investment where the returns are dependent on the performance of, or changes in, the value of underlying or reference assets. Products explicitly included are: open-ended funds, closed-ended funds, recognised funds, structured products, structured deposits, contact for difference (CFDs), insurance-based investments products (IBIPs) and other complex products like derivatives.

The FCA is consulting on its rules relating to CCIs, which are primarily concerned with disclosures to customers. The existing PRIIPs and UCITS disclosure rules use rigidly prescribed document templates, which the FCA says often contain excessive amounts of information, are unengaging, and typically rely on legalistic financial jargon. The new CCI regime is intended to be more flexible and proportionate.

Under the new regime:

• Manufacturers must produce a consumer-friendly product summary. This must include comparable key information about costs, risk and return and past performance.
• Distributors must make the product summary available to investors and highlight key information to help consumers make effective and informed investment decisions.
• Manufacturers will have freedom over the design of the product summary and distributors have flexibility to provide information to investors in innovative ways that support consumer understanding.

The publication of the final FCA rules follows two previous FCA consultations on the new regime.

The main changes to the proposed regime that the FCA made following the consultations included the following:

• more clarity on the scope of regime, particularly for corporate bonds and on the criteria for whether products are considered non-retail;
• more flexibility about the information that distributors must give to clients pre-sale;
• more clarity around costs disclosures, particularly in distinguishing ongoing costs from one-off costs;
• preventing distributors from producing their own product summaries or changing manufacturers’ product summaries;
• modifying some of the rules regarding risk and return to better suit the nature of the product in question (in particular, in relation to structured products); and
• where a CCI invests in a closed-ended fund, changes to the costs disclosure requirements. In particular, the ongoing cost figure (OCF) of the CCI will not need to reflect the costs of the underlying closed-ended fund. This is a change in the FCA’s position, and is likely to be welcome by the fund industry as the previous proposal would have made the costs of the CCI unfairly appear uncompetitive. The costs of the underlying closed-ended fund will still need to be transparent and clearly presented to consumers by manufacturers in the product summary, but they will not need to be included in the OCF.

What are the next steps?

The CCI regime will go fully live on 8 June 2027, and all firms are expected to be fully compliant by then.

From 6 April 2026 (when the new legislation for CCIs come into effect), the FCA will also allow what it describes as an “optional transition period”, during which manufacturers will be able to choose between:

• producing a product summary under the new CCI regime; or
• following the disclosure requirements that currently apply to them under the PRIIPs and UCITS regimes.

The only part of the CCI regime that will turn on before 8 June 2027 is the ability to produce and make available a product summary. Distributors’ obligations remain as just to provide the relevant disclosure document until 8 June 2027.

Authored by Dominic Hill.