The FCA is collaborating with the UK Government on reforming capital markets

The UK’s financial regulator, the Financial Conduct Authority (FCA) is collaborating with the Government on reforming capital markets. The goal is to help retail investors make more informed investment decisions in order to better protect their assets.

The UK To Replace PRIIPs Regulation With The New CCIs

One of the key aspects of the new initiative is to replace the consumer cost disclosure regulation, which the UK inherited from its time as an EU member. Instead, the idea is to create an entirely new framework that would be tailored specifically to the UK markets and their needs.

So far, the Treasury proposed replacing the Packaged Retail and Insurance-based Investment Products (PRIIPs) regulation, and in its place introducing a system known as Consumer Composite Investments (CCIs).

The new legislation will be introduced to allow the FCA the authority to implement this change. The CCI regime would address industry concerns regarding important aspects of the market, such as disclosure agreements, particularly when it comes to costs.

The plan is to have the new framework in place by the end of H1 2025, but before that can happen, it has to pass the Parliament and FCA consultations. The FCA itself intends to consult on the proposed rules for CCIs, which will be one of its main focuses during the upcoming autumn.

Meanwhile, the process will also allow stakeholders to inspect the framework and provide their own input, ensuring that it will function effectively.

UK Government Needs Feedback

If all goes well and the CCI framework gets installed, it is expected to bring a variety of benefits. Its main purpose will be to help investors understand the value and cost of their investments. The FCA and the UK Government are also asking the investment trust sector for feedback on the existing cost disclosure requirements. This information could also affect the investment vehicles, so it is important to have all information at hand.

Investment trusts’ input will be crucial, given that they are quite significant in the country. In fact, they make up for more than 30% of the FTSE 250. In total, they hold more than 250 billion pounds in various assets. With that said, factors like investment performance or market sentiment could significantly influence their valuations.

Once it receives and considers the feedback, the UK Government’s next step will be to legislate to exempt listed investment trusts from the acting PRIIPs Regulation and amend other relevant laws as necessary. This is mostly expected to be a temporary measure since the trusts will later also fall under the retail disclosure framework.

Given that major changes are coming, the FCA will also apply several new measures. For example, starting today, September 19, it will not take action against investment trusts that do not comply with the existing PRIIPs regulations.