By Pritpal Virdee
On 11 July 2023, HM Treasury published a consultation response setting out its intention to repeal the packaged retail investment and insurance products regime (PRIIPS) and establish an alternative framework for a new UK retail disclosure regime which will include UCITS funds and ensure that retail investors have access to the right information on which to base their investment decisions.
Forming part of the Government’s Edinburgh Reforms, which the Government will use to repeal retained EU law on financial services, the consultation was published on 9 December 2022 and sought feedback on the proposed revocation of the PRIIPs Regulation and an alternative framework for a new UK retail disclosure regime. The consultation closed on 3 March 2023. It appears that there was overwhelming support for the repeal of the PRIIPS regulation.
In the consultation response, the Treasury acknowledged that the existing PRIIPs regime has issues in the following areas:
- Prescriptive format requirements that have not led to improved consumer understanding, and are overly burdensome for firms to produce;
- The objective of comparability across such a wide variety of products has led to misleading information being presented to retail investors specifically on risks and costs; and
- Compliance costs associated with the PRIIPs Regulation have dissuaded some firms from making their products available to UK retail investors, reducing consumer choice.
In light of the feedback received, the Government has announced the following:
- That it intends to proceed with its plan to remove all PRIIPs firm facing retail disclosure requirements from UK legislation and authorise the FCA to deliver a new retail disclosure regime which is specifically tailored to the UK market;
- UCITS vehicles will be within scope in the new retail disclosure regime;
- It will ensure that the FCA considers concerns related to the following aspects in designing the new regime: products in scope of the new UK disclosure regime, accuracy of disclosure information, and ensuring flexibility is balanced with comparability so that customers are provided with the appropriate information to make effective investment choices; and
- The FCA will be granted certain additional powers, beyond those already contained within the FSMA, to ensure that the new retail disclosure regime applies to certain unauthorised firms (which currently form part of the PRIIPs market but which will cease to be subject to obligations under the current PRIIPs regulation when it is repealed) and overseas funds (to ensure a level playing field).
By 2024 the Government will publish a draft Statutory Instrument by 2024 to enable the FCA to deliver the new retail disclosure regime. The FCA will publish a consultation paper seeking industry feedback on its draft rules for the new retail disclosure regime, building on the principles discussed in the consultation response and in their December 2022 Discussion Paper on the future disclosure framework for retail investments (DP22/6: Future Disclosure Framework). There will inevitably be a transitional period between the old and the new, the Government and the FCA are expected to publish information about this transitional period and the intended changes in due course, with a view to providing a seamless transition.
For further UK financial services regulatory updates, please visit the Burges Salmon blog.
The Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation is retained EU law which was designed to provide greater transparency and standardise disclosure for retail investors. Recognising significant problems with the disclosure regime, the government announced its intention to repeal the PRIIPs Regulation as a matter of priority