FCA consults further on new CCI regime

Key points

On 16 April 2025, the FCA launched a supplementary consultation on the new Consumer Composite Investment (CCI) regime, seeking feedback on new proposals that build on those initially made in December.

The new recommendations cover areas that were not addressed in the initial consultation, including:

• the removal of implicit costs from transaction cost calculations;
• adjustments to make the transition period more flexible; and
• changes to align CCI costs disclosure with MiFID costs disclosure.

The new consultation also appends several annexes illustrating the necessary technical changes to the FCA Handbook, including the Product Disclosure Sourcebook. The changes assume that the December proposals will be fully implemented, along with legislative changes to the assimilated MiFID Organisational Regulation suggested in CP 24/24.

The consultation closes on 28 May 2025 and the FCA plans to publish final rules based on feedback from both consultations in H2 2025.

Three positives are immediately apparent from this supplementary consultation.

The first is the simplified approach to transaction costs - the previous approach would have been difficult to implement consistently for more complex and structured products.

Secondly, the alignment of CCI costs with MiFID costs disclosure should provide benefits in terms of avoiding duplication – after all, what is the point of having multiple overlapping cost disclosure frameworks? The more that can be done to reduce overlap the better.

Thirdly, the flexible transition period should give market participants breathing space, allowing firms to toggle implementation to suit their current systems and operations. This is a good idea, as there's no need for all regulatory change to be a sprint to the finish.

Background

The UK PRIIPs Regulation on key information documents for packaged retail and insurance-based investment products (PRIIPs) was onshored from the EU on 31 December 2020. It imposes disclosure obligations on manufacturers and distributors of certain types of securities made available to retail investors in the UK, including the provision of a Key Information Document, or KID.

The PRIIPs disclosure regime has long been considered overly prescriptive. In response, the UK announced plans in 2022 to simplify the rules and make them more flexible. The first set of proposals was introduced in December 2024 and includes:

• changes in terminology, so that a PRIIP becomes a CCI and a KID becomes a product summary;
• a more flexible approach to disclosure, so that firms can disclose information in a more consumer-friendly way without using a prescribed format; and
• a more flexible risk scale, based on a scale of 1-10 rather than 1-7.

The changes are intended to make it easier for firms to present information in the most consumer-friendly way and tailor disclosure to specific investors where necessary.

Latest proposals

Removal of implicit costs from transaction costs

The December consultation made certain recommendations regarding general costs disclosure (chiefly, that manufacturers provide a single, aggregated ongoing costs percentage for CCIs), but left transaction costs to be addressed in the supplementary consultation.

The FCA's core recommendation here is that transaction cost calculations should be simplified by removing the requirement to include implicit costs (such as bid-ask spreads and funding spreads), which are usually minimal and can be outside the manufacturer's control, and include only explicit costs (such as broker fees, exchange fees and stamp duty), which are more likely to be within the manufacturer's control.

In summary, the FCA recommends that transaction costs:

• include only explicit costs, with implicit costs excluded;
• be presented as numerical figures rather than described in a narrative;
• be disclosed separately from other ongoing costs, but included in the summary cost figure (as described in the December consultation); and
• be calculated using the average of actual incurred transaction costs, unless the CCI has been active for less than 36 months, in which case costs should be reasonably estimated.

The FCA considers that these changes will significantly reduce complexity for manufacturers but still give consumers the information they need. This is true, but the FCA's regime could have gone further.

CCI and MiFID alignment

The consultation also proposes certain changes to the MiFID cost disclosure rules to align these with the CCI proposals and remove any overlap. This is expected to involve the FCA rewriting Article 50 of the assimilated requirements of the MiFID Organisation Regulation¹, and deleting Article 51, with a more comprehensive review of the assimilated MiFID provisions to follow in due course.

The MiFID provisions should be disapplied where they are otherwise covered by the CCI regime or other regulatory frameworks. Clients need to be informed about what they are being charged, but only once and in one form.

More flexible transition provisions

In the December consultation, the FCA acknowledged that firms would need a significant transition period to adapt their systems and procedures to accommodate the new CCI regime. It therefore proposed an 18-month transition period during which in-scope firms could choose to follow either the existing PRIIPs regime or the new CCI regime.

The latest consultation looks in more detail at the practical implications for manufacturers and distributors, updating the proposal to clarify that, even if firms adopt the new CCI regime before the end of the transition period, the majority of the rules won't take effect until the 18 months have elapsed.

Manufacturers

The new rules are expected to come into force later this year or early next year. For the first 18 months, manufacturers will be able to continue producing a Key Information Document (KID), rather than having to immediately switch to a CCI product summary.

Similarly, manufacturers whose products are currently subject to alternative disclosure arrangements (for example, Consumer Duty and/or COBS disclosure requirements for UK-listed closed-ended investment companies) may continue using these arrangements during the transition period if they choose to do so.

However, at any point during the transition period, manufacturers will be able to switch from providing a KID (or other disclosure) to providing a product summary, whether for new and/or existing products. In such case, the manufacturer will only need to follow the specific rules in the Product Disclosure Sourcebook that relate to the provision of a product summary. The broader requirements - such as the requirement to make "core information" available in machine-readable format – will only apply after the transition period has elapsed.

This approach is designed to give firms the full benefit of the transition period to prepare for the new regime, without penalising those that choose to adopt product summaries ahead of the deadline.

Distributors

The transition period is intended to prevent distributors from having to switch between the existing PRIIPs regime and the new CCI regime depending on the disclosure format chosen by the manufacturer. To support this, the FCA has said that it will continue to accept distributor disclosures that comply with the outgoing PRIIPs regime throughout the transition period.

As with manufacturers, distributors will only become subject to the bulk of the new rules at the end of the transition period. This means that if, for example, the final rules allow distributors to use their own product summary in place of the manufacturer’s (as proposed in December), this would only apply after the transition period has ended. However, it is worth noting that this particular proposal has been the subject of significant debate, and, depending on the feedback received, it may ultimately not be adopted.

New CCIs

Manufacturers will not need to prepare either a KID or a product summary for new CCIs during the first 12 months of the transition period. For the following six months, they will be able to follow either the outgoing PRIIPs regime or the new CCI regime. After the transition period, they will need to switch to a CCI product summary along with the rest of the industry.

Timing

Market participants have suggested that the proposed 18-month transition period is too short and have asked for it to be extended. No extension is proposed in the new consultation, but, depending on the combined feedback to the two consultations, this may be addressed in the final rules.

Complaints handling

The consultation also recommends that unauthorised manufacturers of CCIs be required to implement "reasonable and transparent complaints handling procedures", ensuring that consumer complaints are dealt with in a competent, diligent and impartial way, without unreasonable delay. This is because unauthorised manufacturers and distributors do not fall within the compulsory jurisdiction of the Financial Ombudsman Service, so retail investors would have no right of access to the FOS if they needed to make a complaint about these types of firms.

Revocation of existing PRIIPs guidance

It is of particular note for market participants familiar with EU-era PRIIPs guidance that the proposed changes will officially revoke the following, now obsolete, level three materials that currently appear on the FCA Handbook website under the PRIIPs dossier:

• Joint ESAs February 2019 supervisory statement concerning the performance scenarios in the PRIIPs KID;
•  August 2017 flow diagram for the risk and reward calculations in the PRIIPs KID; and
• November 2017 Questions and Answers on the PRIIPs KID.