A CCI (consumer composite investment) is an investment where returns depend on the performance of or changes in the value of indirect investments. This category includes open-ended funds, closed-ended funds, structured products, structured deposits, contracts for difference, insurance-based investment products (IBIPs), and other complex products such as derivatives. Essentially, the definition used by the FCA matches closely the PRIIP definition.

The FCA wishes that a CCI must be accompanied by a “Product Summary”, which will replace the PRIIPs Key Information Document (KID) and the UCITS Key Investor Information Document (KIID) in the UK. The CCI regime will apply to any firm that manufactures or distributes a CCI to retail investors in the UK.

Interestingly, distributors will have the option to create their own product summary for a CCI. Even if they choose to use the product summary provided by the manufacturer, distributors could utilize the core information disclosures to enhance their understanding of the product and produce additional materials to improve consumer comprehension. To facilitate this, the manufacturer will be required to provide distributors with core information in machine-readable format.

The FCA proposes to maintain the current flexibility under the PRIIPs regime, which allows providers of multi-option products (MOPs) to offer consumers either a generic document covering the entire product or individual documents for each underlying investment option. This approach would continue to apply to insurance-based investment products (IBIPs).

Feedback is requested by 20 March 2025. A policy statement outlining the final rules is expected later this year. The FCA intends for the CCI regime to take effect upon the publication of the Policy Statement or shortly thereafter, with a significant transitional period to ease implementation.

Firms will have the option to begin transitioning to the new regime as soon as the firms are ready. However, existing PRIIPs KIDs, UCITS KIIs, or equivalent disclosures produced in accordance with current requirements will remain compliant during the proposed 18-month transition period.

UCITS funds currently benefit from an exemption from the PRIIPs disclosure regime, which extends until the end of 2026. After the conclusion of both the exemption and the transition period, UCITS funds will be required to adhere to the CCI rules.

The product summary is designed to be a standalone document that is short, concise, and accessible on the firm’s website. It must be reviewed and updated at least once every 12 months to ensure the information remains accurate and relevant. The product summary must include basic information about the CCI, as well as details on costs, charges, risk, and performance. Unlike the PRIIPs KID or UCITS KIID, there is no prescribed format or layout for this document, allowing manufacturers flexibility in its design.

The product summary must clearly state the name and type of the CCI. If applicable, it should include an International Securities Identification Number (ISIN) or another unique product identifier. Additionally, it must provide the legal name of the manufacturer and indicate the date when the core information was produced or most recently updated.

Manufacturers are expected to describe the product’s objectives and strategy, including any environmental or social goals associated with the CCI. They must also provide clear and accessible information on how investors can file complaints about either the product or the manufacturer.

The product summary should indicate whether the investment has a fixed term or a recommended holding period. It must also direct investors to additional resources or information about the CCI product, ensuring they have access to all relevant details to make informed decisions.

Under the PRIIPs regime, cost disclosures are required in the Key Information Document (KID). These disclosures must include all direct and indirect costs associated with an investment, such as one-off costs, recurring costs, and incidental costs. Additionally, the total aggregated costs over time must be presented as a single figure in both monetary and percentage terms, assuming a nominal investment of £10,000 and moderate performance, where applicable.

To promote consistency and comparability in cost disclosures across CCI products, the FCA proposes a baseline cost methodology for all product types, with specific considerations included for certain categories such as tracker funds, closed-ended investment companies, and insurance-based investment products.

The types of costs and charges to be disclosed will remain broadly the same as PRIIPs: One-off entry and exit costs, ongoing costs, and transactional costs (to be presented only in percentage points!). An aggregated summary of these costs in both percentage and monetary terms is expected.

With regards to performance fees and carried interests no numbers are expected, but any such number must be explained in a clear and easily understandable language.

Reduction in yield will be replaced by a summary costs indicator over a 12-month period.

As for transaction costs: the FCA proposes to retain the transaction cost methodology used under the PRIIPs framework, based on slippage calculations, with slight adjustments to better reflect product transaction costs.

Funds will continue to be required to account for the costs of any underlying products they invest in, referred to as "pull-through costs." However, an exception will apply to tracker funds, recognizing their unique structure and cost profile.

The PRIIPs Summary Risk Indicator (SRI) has faced significant criticism for being rigid and inadequate in capturing the diverse range of products available. This has resulted in cases where the SRI fails to accurately reflect the true risk level of a product. Additionally, while the PRIIPs SRI and the UCITS Synthetic Risk and Reward Indicator both use a 1–7 scale, their differing calculation methodologies can lead to inconsistent results. The FCA aims to harmonize the treatment of PRIIPs and UCITS under the CCI framework.

The FCA proposes maintaining a standardized risk and reward metric, calculated by the product manufacturer. This metric would focus on volatility, measured using the standard deviation of returns observed s over the past five years or the returns of an appropriate benchmark or proxy. Manufacturers would also be required to assess whether the calculated risk score is appropriate and, if necessary, adjust it upward to better reflect the product’s risk level.

To improve granularity and address the clustering of certain products, the FCA proposes moving to a 1–10 risk scale. In the consultation paper, the FCA introduced a “Conversion of SRI to CCI Risk and Reward Metric” table. This table maps the proposed 1–10 scale to the current PRIIPs 1–7 scale, effectively adding three additional risk levels by breaking down the existing thresholds. However, there is a flaw in this approach. Since the VEV generally yields a higher percentage than the standard deviation, it is likely that very few products will fall into risk scores higher than 6 or 7. This issue becomes more evident when examining the UCITS thresholds for SRRI calculations, where an SRRI of 6 corresponds to volatility exceeding 15%, and an SRRI of 7 begins at 25%. As a result, the 9 and 10 brackets will apply to less funds than the current 6 and 7 brackets of the MRM, despite using the same boundary (> 30%). Secondly, we also expect many funds will lower in risk score.

The FCA proposes that products meeting any of the following criteria must be assigned a minimum risk score of 9 on the scale. Manufacturers should assess the product’s overall risk profile when determining whether to assign it a score of 9 or 10.

1. High-risk products include:
2. Highly leveraged products
3. Products structured so that consumers could lose more than their investment
4. Derivatives
5. Contracts for difference
6. Contingent convertible securities (CoCos)
7. Venture capital trusts (VCTs)
8. Products with very low liquidity or those that are not regularly priced

Products structured in such a way that consumers could lose more than their investment must be assigned the maximum risk score of 10 and must include a clear warning to that effect.

The FCA anticipates that most structured products will fall into two main categories: capital guaranteed notes and unprotected income/growth notes (capital-at-risk products). For capital guaranteed notes, manufacturers are expected to determine the risk score based on the underlying asset class or a mix of asset classes. Structured deposits are considered to fall at the lowest end of the risk scale (risk score of 1). For capital-at-risk products, with returns tied to multiple indices or involving gearing should generally be assigned a risk score of at least 9. These products should also include a label to emphasize their complexity. Additionally, where applicable, manufacturers or distributors may use alternative, industry-standard risk measures, such as Value-at-Risk, to support consumer understanding.

Under the UCITS KIID requirements, manufacturers must include a bar graph displaying a fund’s past performance. The European PRIIPs KID mandates the presentation of future performance scenarios. In contrast, the UK’s PRIIPs KID does not include past performance or performance scenarios but instead provides only a descriptive explanation.

The FCA proposes that past performance be presented as a line graph covering a 10-year period, where such data is available. Manufacturers must use at least quarterly data points to construct the graph. For products with less than 10 complete years of performance data, firms should include all available data. If a product has less than 12 months of performance data, the available data must be presented with sufficient frequency to enable retail investors to make informed decisions. Firms may opt not to display past performance for products with less than three months of data.

The line graph should include a relevant benchmark where applicable, allowing consumers to compare and assess the product’s performance. For products without a suitable benchmark, manufacturers are not required to select one. In such cases, the graph may be presented without a benchmark. Manufacturers must, however, provide a short explanation of how investors can assess the product’s performance in the absence of a benchmark. If a benchmark is used, manufacturers must include a statement explaining why it was chosen.

The line graph should assume an initial investment of £10,000 for both the product and the benchmark. For products denominated in a currency other than pounds sterling, the equivalent amount in the relevant currency should be used. Past performance data must be displayed net of all product costs and charges, ensuring consumers see a realistic representation of the returns. The graph should show how the value of the initial investment has changed over time for both the product and the benchmark. The graph should be accompanied by narrative explanations to help consumers interpret the past performance data.

Products that lack past performance data, such as structured products and other fixed-term investments, will not be required to provide a past performance graph. Instead, these products must include a narrative explanation of the factors likely to impact performance, whether positively or negatively.