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Explanatory note

Original text. Later amendments are not shown.

(This note is not part of the Regulations)

These Regulations designate activities in relation to consumer composite investments (“CCIs”) for the purposes of the Financial Services and Markets Act 2000 (c. 8) (“FSMA 2000”) (see Part 5A of FSMA 2000), replacing assimilated law revoked by section 1(1) of, and Schedule 1 to, the Financial Services and Markets Act 2023 (c. 29) relating to packaged retail and insurance-based investment products (“PRIIPs”). The legislation being replaced (“PRIIPs legislation”) includes:

  • the Packaged Retail and Insurance-based Investment Products Regulations 2017;

  • Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (“PRIIPs Regulation”);

  • Commission Delegated Regulation (EU) 2016/1904 of 14 July 2016 supplementing Regulation (EU) No 1286/2014 of the European Parliament and of the Council with regard to product intervention;

  • Commission Delegated Regulation (EU) 2017/653 of 8 March 2017 supplementing Regulation (EU) No 1286/2014 of the European Parliament and of the Council on key information documents for packaged retail and insurance-based investment products (PRIIPs) by laying down regulatory technical standards with regard to the presentation, content, review and revision of key information documents and the conditions for fulfilling the requirement to provide such documents.

CCIs, formerly PRIIPs, are investments and contracts of insurance (or any interest in an investment or contract of insurance) where the value or amount payable to the investor goes up or down because of exposure to reference values, which track the performance of a group of assets, or to the performance of one or more assets which are not directly purchased by the investor.

The activities designated by these Regulations are manufacturing CCIs made available to retail investors located in the United Kingdom, advising retail investors located in the United Kingdom, or their agent, on CCIs and offering or selling CCIs to retail investors located in the United Kingdom (“CCI activities”).

The Regulations define CCIs (as above) and specify products which are excluded from this definition for the purposes of these Regulations. They also establish a temporary exclusion from designated activity rules made by the Financial Conduct Authority (“FCA”) under section 71N of FSMA 2000 by virtue of regulation 6 (“CCI rules”) for operators of UK and EEA undertakings for collective investment in transferable securities (“UCITS”) and non-UCITS retail schemes.

The Regulations enable the FCA to make CCI rules and give directions in relation to the carrying on of CCI activities. They include the powers to make temporary CCI rules in certain circumstances. The Regulations apply and modify sections 138M to 138O of FSMA 2000 to establish the procedure for making temporary CCI rules, including exemptions from certain consultation requirements and a requirement for the FCA to issue a statement of its policy with respect to the making of temporary CCI rules.

The Regulations establish civil liability for breaches of CCI rules. The Regulations also apply section 384 of FSMA 2000 to contraventions of requirements imposed by CCI rules to empower the FCA to require restitution.

The Regulations remove the exemptions for persons advising on or selling PRIIPs from the financial promotion restriction (see section 21(1) of FSMA 2000) and the scheme promotion restriction (see section 238(1) of FSMA 2000) when providing the key information document, which contains information required by PRIIPs legislation, in accordance with Article 13 of the PRIIPs Regulation. This means that the provision of information required by CCI rules may constitute a financial promotion or scheme promotion.

The Regulations also make consequential amendments relating to the coming into force of these Regulations and the revocation of PRIIPs legislation, as well as transitional provision.

The FCA Handbook is available on www.handbook.fca.org.uk and copies of the rules, guidance or other instruments referred to can be obtained from the FCA, 12 Endeavour Square, London, E20 1JN, where they are also available for inspection.

A full impact assessment has not been produced for this instrument as no, or no significant, impact on the private, voluntary or public sector is foreseen. A de minimis impact assessment of the effect of this instrument is available from HM Treasury, 1 Horse Guards Road, London, SW1A 2HQ and is published with the Explanatory Memorandum alongside this instrument at www.legislation.gov.uk.