FCA revamps PRIIP rules in first post-EU move

The FCA says it is making the changes to protect consumers better and the changes mark the first major post-Brexit rule change.

One major change is to performance scenarios in Key Information Documents which the FCA says can be “misleading” for consumers in some cases.

The new regulations are covered in PS22/2: PRIIPs – Final scope rules and amendments to Regulatory Technical Standards.

The changes will affect the rules on corporate bonds and the performance scenarios used in Key Information Documents (KIDs).

The rules will affect any planners who advise on PRIPPs as well as platforms, fund managers and others.

The regulator said it was making the changes after analysing feedback received to its consultation CP21/23. 

Key changes include:

• introducing rules to clarify the scope of the PRIIPs Regulation for corporate bonds, making it clearer that certain common features do not make them into a PRIIP 

• introducing “interpretative guidance” to clarify what it means for a PRIIP to be ‘made available’ to retail investors  

• amending the PRIIPs Regulatory Technical Standards to replace the requirements and methodologies for presentation of performance scenarios in the KID, with a requirement for narrative information on performance to be provided  

• address the potential for some PRIIPs to be assigned an inappropriately low summary risk indicator in the KID   

• address concerns about certain applications of the ‘slippage’ methodology when calculating transaction costs 

The FCA says the updated regulations will, “address the areas that pose the most harm to investors.”

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In the area of performance scenarios for funds, the FCA says on certain products these can currently be “misleading” for consumers and the changes will help those buying without financial advice to rely on the KID to make more informed investment choices. 

Firms have until 31 December 2022 to implement the changes.  The Handbook rules and RTS will come into force today (25 March 2022), with a transition period which will end on 31 December, by which date firms must apply the new requirements.

While some respondents called for a fundamental review of the whole PRIIPs regime, the FCA says that legislative changes made by the Treasury were targeted to fix the most harmful issues quickly following the UK’s exit from the EU. However, the Treasury has committed to carrying out a review of retail disclosure in the future and the FCA will support this. 

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