FCA’s CCI Framework
Scope
The framework applies to both manufacturers and distributors of a wide range of investment products, including:
1 e.g. PRIIPs, UCITS, NURS, non-PRIIP packaged funds (excluding pensions)
2 e.g. Investment Companies, VCTs
FCA’s CCI Framework
Timing
Consultation
19 Dec 2024 – 20 March 2025, with additional ‘sub’ consultations in early 2025 (transaction costs and transitional provisions).
Final rules
Policy Statement (PS) to be published at some point in 2025 (anticipated Q2/Q3). CCI will enter into force at this point.
Implementation
2-month transition period for closed-ended funds. 18-months for all other product types. Firms can however begin to apply the CCI rules as soon as it enters into force when the PS is published.
FCA’s CCI Framework
Requirements
The new framework introduces several changes:
- Replaces the PRIIPs KID / UCITS KIID with a standalone, simplified product summary, plus an accompanying machine-readable file containing the core information per the product summary.
- The product summary is not subject to a fixed, regulator-defined template, enabling flexibility in disclosures. It is, however, subject to standardisation of the information to be contained within it.
- Manufacturers can satisfy these requirements by publishing the product summary on their website and providing the machine-readable data to their distributors.
- The product summary must contain basic information (identifiers, strategy/objectives, date of revision, complaints/redress and similar), along with risk, past performance and costs & charges information.
- Risk – Replaces the 1-7 scale under PRIIPs/UCITS with a 1-10 scale, based on the standard deviation of returns over a 5-year history.
- Costs & Charges – broadly consistent with PRIIPs
– requires one-o entry/exit costs, ongoing costs, transaction costs and contingent costs
(performance/carried interest) to be disclosed. The FCA will however consult further on the
transaction cost methodology in early 2025.
Eliminates the ‘reduction in yield’ presentation in PRIIPs, in favour of a trailing 12-month aggregated cost impact.
- Performance – eliminates forward-looking performance scenarios as under PRIIPs, in favour of a past performance across a 10-year history (or up to, if 10 years is not available).
FCA’s CCI Framework
Key challenges
Flexibility on format and layout is good, however it poses a risk to comparability where investors are faced with multiple formats.
Firms might consider not only the format of presentation, but the ordering of information within this e.g., leveraging insights from behavioural economics
How will the dynamics between manufacturers and distributors play out? Will distributors seek to modify product summaries widely, and if so, how? Will they require additional information?
Firms with UK and EU fund ranges will need to maintain and monitor divergent methodologies across calculation components (risk, performance, costs)
CCI is technology-neutral – will firms seek to move beyond PDFs to a more digital interactive/ layered presentation?
The transition period for closed-ended funds is only 12-months (vs. 18-months for all other product types). Expect this to be challenging if it is not amended in the final rules.
Our next steps
Confluence will be adapting our existing end-to-end PRIIPs KID and UCITS KIID production solution to support impacted firms.
Disclaimer
About Confluence® Technologies
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