In the fourth article of our Blog Series on the new Consumer Composite Investments (CCI) regime, Seamus O’Cuill, Head of Investor & Digital Services at Funds-Axis, explores the remaining proposed disclosure requirements beyond costs, risk and reward, and performance – topics covered in our previous articles.
Background and Overview
The Financial Conduct Authority (FCA) proposes that a Product Summary be prepared, encompassing additional key information alongside disclosures related to costs and charges, risk and reward, and performance.
These additional disclosures include:
- Identity Information
- Product Characteristics
- Complaints and Redress
- Holding and Exiting
- Other Relevant Information
Identity Information
Under the Consultation Papers, manufacturers must disclose the following details:
- Product name
- ISIN or another unique product identifier
- Manufacturer’s legal name
- Date from which the core information/product summary is applicable
Product Characteristics
The following information must be included:
- The aims and strategy of the CCI
- Description of underlying assets
- Markets to which the CCI has significant exposure or sensitivity
- ESG objectives
- For feeder funds, a complete description of the master fund
- Explanation of how returns are determined
- If returns are based on a formula rather than asset valuation, a detailed explanation of the formula’s mechanics
Complaints and Redress
Manufacturers are required to provide:
- A clear process for filing complaints about the product or the manufacturer
- Information on any applicable compensation schemes, including eligibility criteria
- Explicit disclosure of risks where no compensation cover is available
Holding and Exiting
Since investors will eventually need to exit their investments, clear guidance on exit mechanics must be provided. Required disclosures include:
- Recommended holding period
- Minimum holding period (where applicable), including a warning that such terms may make the CCI unsuitable for certain investors
- Any penalties or early exit fees
Other Relevant Information
Investors should be advised as to where they can find other information/documents about the product such as the prospectus, annual reports, assessment of value reporting, ESG documentation etc.
Industry Commentary
Seamus O’Cuill, Head of Investor & Digital Services at Funds-Axis, noted:
“There is significant alignment with existing legislation, including UK PRIIPs, EU PRIIPs, and UCITS KIID, with the most effective elements of each being incorporated into the current proposals.
Standardised product identification and disclosure of objectives and investment policy are now widely consistent. Likewise, the inclusion of references to supplementary documentation is a welcome addition.
Moreover, the explicit requirements for exit mechanisms, penalties, and complaints handling build upon the good practices introduced by PRIIPs legislation.
The Funds-Axis team continues to analyse the Consultation Papers to support clients in their transition to the new regime.”
