18 April 2025

UK Regulatory latest

A) Latest UK-CCI framework proposals

“Following the amendments we made in PS22/2, we believe the transaction cost methodology used under PRIIPs provides an appropriate representation of product transaction costs.”
Financial Conduct Authority, 19 December 2024 [CP 24/30] 

“Implicit transaction costs, including slippage (the difference between the price at which a trade is executed and the ‘arrival price’ when the order to trade is transmitted to the market), can be imprecise and hard to measure accurately. The bid-ask spread is determined by market movements and can be largely outside the control of firms, producing both positive and negative costs.”
Financial Conduct Authority, 16 April 2025 [CP 25/9]

1. FCA drop ‘implicit’ transaction costs, defer final rules until Q4-2025

This week, the Financial Conduct Authority (FCA) issued their second consultation paper (CP) on the new Consumer Composite Investment disclosures, to replace both local PRIIPs KIDs and UCITS KIIDs in the UK.

This is now open for feedback until 28 May.

The first UK-CCI dialogue (which ended only last month) omitted several key areas, which the FCA say they have now addressed. Here is a summary of their latest proposals.

a) UK-CCI transaction costs

Despite keeping the customised version of PRIIPs ‘slippage’ methodology in their first CP, the FCA have now decided to remove the entire calculation / disclosure of ‘implicit’ transaction costs, from the new CCI rulebook.

All ‘Arrival Price’ and ‘New PRIIPs’ rules are deleted from the latest draft DISC sourcebook (chapter 6.4).

It is said this simplification “would remove a significant compliance burden for firms, while ensuring that consumers are still provided with the most relevant information about the transaction costs of their chosen product.”

The FCA retain disclosure of ‘explicit’ transaction costs, based on an average of items directly incurred (e.g. broker fees, exchange fees, and stamp duty). CCI products operating for less than 36 months can estimate these costs “on a reasonable basis”.

The FCA also seek to align UK-MiFID cost disclosures. The newly revised draft COBS sourcebook states that UK-CCI product costs and charges required for MiFID pre/post sale disclosures aggregation, are the same as those disclosed in the CCI Product Summary document.

b) Transitioning

The FCA have not updated the original 12-18 month UK-CCI transition schedule (replicated on p.16 in the latest CP).

Latest proposals for manufacturers and distributors are “regardless of the length” of the final CCI transition period (i.e. yet to be decided). In the meantime, the FCA anticipate “adjusting the timelines” originally proposed, to enable the new UK-CCI regime to “come into force for all firms at the same time”.

c) Manufacturer options

During the transition period, manufacturers will retain the option to:

Continue producing the current UCITS KIID, PRIIPs KID, NURS-KII document; or
Produce a new UK-CCI Product Summary document “at any time during the applicable transition period, …as set out in our final rules”.

This applies for both new and existing products. Manufacturers remain responsible for producing a KID/KIID/CCI Product Summary and making it available to distributors. However, early-adopters of the new CCI-Product Summary document will not be required to provide the ‘Core Information’ file (in a machine-readable format), for the duration of the transition period.

NB: the latest draft legal text (p.65) also confirms that authorised fund managers must file their Product Summary documents with the FCA (i.e. for each UCITS /NURS scheme managed, including any updates). As before, firms are expected to make these publicly available on their websites.

d) Distributor options

Distributors are still obliged to ensure that the document prepared by the manufacturer is presented to a consumer “sufficiently early before the point of sale to allow the investor enough time to consider it”.

However, their option to substitute the manufacturer’s Product Summary (with their own version) only becomes available after the transition period is completed.

e) Closed-ended Investment companies options

CEIC-related products distributed to UK retail investors (i.e. removed from UK-PRIIPs scope last November), will be able to “continue with their alternative arrangements during the transition period if they wish”.

f) Consequential amendments

The new consultation paper contains marked-up legal text for all respective ‘Sourcebooks’ (depicted on p.18). This covers extensive areas of their central ‘Handbook’ of rules, directly impacted by new UK-CCI requirements (including those replacing ‘outgoing’ UK-PRIIPs and UK-KII regimes).

NB: The latest draft Conduct of Business sourcebook [COBS 13.1] includes a deletion of the local UCITS exemption period-end from the local UK-PRIIPs regime (i.e. previously set to expire on 31 December 2026). The FCA confirm that “UCITS manufacturers will not need to transition from providing a KIID to a PRIIPs KID at any point”.

g) Use of FSMA powers

The CCI regulatory framework has been facilitated by the Designated Activities Regime (DAR). This gives the FCA certain rulemaking, supervisory, and enforcement powers over non-authorised persons who carry out certain activities designated by the Treasury, without them needing to be authorised by the FCA.

This is explained further in the new CP (p.22-23).

2. Next steps, interim uncertainty

“It is expected that overseas recognised funds will be required to follow FCA rules under the new UK retail disclosure framework for CCIs from 1 January 2027 at the latest.”
HMT / FCA, 1 May 2024 [‘Roadmap to implementing the Overseas Funds Regime’]

The UK-CCI Policy Statement (with finalised rules) will now be published in late-2025. The FCA will continue to “consider respondent feedback from both consultations to inform our final position”.

The biggest difficulty now facing firms within scope is the unconfirmed changeover schedule.

In their first paper, the FCA expressed intent for the “CCI regime to come into force when our Policy Statement is published, or shortly after”. This means a 1 January 2026 UK-CCI transition ‘start date’ seems likely.

However, while the FCA had also pledged “a substantial transitional period”, the exact duration of this is now unclear (i.e. emphasised by the removal of the previous UCITS→UK-PRIIPs moratorium).

Meanwhile, both the Overseas Fund Regime schedule and Temporary marketing permissions regime expiry remain aligned, ending on 31 December 2026.

NB: A reminder that in May 2024, the FCA and UK Treasury stated their expectation that ‘equivalent’ EU-UCITS should follow new UK-CCI disclosure rules “from 1 January 2027 at the latest” (i.e. per joint OFR roadmap, p.8).

B) UK sustainability latest

“I am pleased to share an incredible milestone - over 100 SDR fund labels!”
FCA Director of ESG [media message, 26 February 2025]

1. UK-SDR recent events, current trends

The FCA’s Director of ESG recently announced that over 100 funds have now adopted one of the available SDR product labels.
On 2 April, the ‘temporary SDR flexibility’ granted by the FCA to certain fund firms (using ‘sustainable’, ‘sustainability’ or ‘impact’-related naming terms) expired. All asset managers must now comply with SDR ‘naming and marketing’ rules, including consumer-facing and pre-contractual disclosures (for both labelled and unlabelled products).
The FCA have amended their ESG sourcebook [5.1 ‘Preparation of sustainability disclosures’] to give local firms an extra 4 monthsto prepare their initial ‘ongoing product-level disclosure’
In their outlined ‘Position on sustainability regulations and UK defence’, the FCA say their SDR regime “does not prescribe which activities or investments are sustainable, nor does it prevent investments in certain sectors, including defence”.
The FCA have again delayed their Policy Statement to bring Portfolio Managers within scope of the SDR regime. This was expected to appear during Q2-2025. They will now “take the necessary time to deliver these outcomes, will continue to reflect on the feedback and provide further information in due course”.

2. Latest UK-ESG consultation status

The UK Treasury have yet to officially respond to the consultation assessing the future role of the local ‘Green Taxonomy’, that ended on 6 February.

The planned consultation on extending UK-SDR to the Overseas Fund Regime (i.e. originally planned for Q3-2024) is still yet to appear. It is rumoured the UK Government may await the outcome of the EU Commission’s SFDR Level 1 legal assessment (now deferred until Q4-2025), before proceeding with further local dialogue.

C) other UK developments

1. HMT, FCA propose local AIFMD changes

On 7 Apr 2025, the UK Treasury began to consult on simplifying the local AIFMD legal framework, to “establish a more graduated and proportionate approach”. This was accompanied by an FCA Call for Input [‘Future regulation of alternative fund managers’], based on the HMT’s latest ideas.

Together, their main proposals are:

Remove current legislative thresholds (e.g. local “Small Regimes”)
Introduce new AIFM rule structure (depicted p.9 in FCA paper)
Re-categorise UK AIFMs into three tiers:
- Large firms [NAV > £5bn]: subject to a regime akin to the current rules for full-scope UK AIFMs.
- Mid-sized firms [NAV > £100m]: subject to a comprehensive regulatory regime, but without many of the prescriptive detailed requirements, to allow for greater flexibility.
- Small firms [NAV < £100m]: subject to core baseline (‘principles-based’) standards.

Both GovUK and FCA papers are open for comment until 9 June 2025.

Subject to feedback and UK Treasury decisions, the FCA plan to consult on detailed future AIFMD regime rules in the first half of 2026. They will also provide more details on the timeline for implementation.

NB: Other AIFMD regime changes are under consideration, such as Regulatory reporting.

The FCA state “AIFM reporting regime has not been reviewed since it was introduced. We want to collect meaningful information in a way that is future proof, helps us understand the market and monitor the collective and individual risks posed by firms. We want a more effective reporting regime that is proportionate in its demands on firms and will consider how to achieve this.”

2. Latest UK Regulatory Initiatives Grid published

This week, the UK Financial Services Regulatory Initiatives Forum (including the FCA and UK Treasury) published their latest ‘Regulatory Initiatives Grid’, setting out planned regulatory initiatives for the next 24 months.

Alongside the latest UK-CCI and AIFMD activities, a ‘Review of the UK Funds Regime’ formal engagement is now planned for Apr-Jun 2025. No further SDR activities are currently scheduled this year.

3. Other recent FCA publications

Within the past few weeks, the FCA have also published:

A 5-year strategy: launched to “deepen trust, rebalance risk, support growth and improve lives”;
Outcomes & metrics [2025-30]: setting out their goals, per key strategic themes
FCA annual work programme: outlining new and ongoing work to achieve outcomes in the next 12 months.

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Article written by Mark Kilbride [Regulatory Affairs Advisor, Kneip Product team].

Feel free to contact me at [email protected].