The Financial Conduct Authority has today published plans for a new UK-focused consumer investment regime to simplify the information given to investors and scrap EU-based rules.

The FCA says its new 'Consumer Composite Investments' proposals (CP24/30) will replace existing EU-based rules on investor information with a new standard aimed at boosting investor confidence and increasing investment. 

The FCA says the current EU-based rules can often be “confusing or overwhelming” for investors.

The regulator has set out its proposals today in CP24/30: ‘A new product information framework for Consumer Composite Investments.’

According to FCA research, more than 12.6m UK investors (23% of all adults) hold an investment covered by the Consumer Composite Investment.

The regime will cover funds, Packaged Retail and Insurance-based Investment Products (PRIIPs) and other investments.

The watchdog says the new product information regime will help consumers better understand the investment products they are buying and give providers the flexibility to innovate.

The proposals will shift information disclosure from “an overly prescriptive disclosure regime” to a more flexible, simpler approach, the FCA said.

The new regime will aim to prioritise “good consumer outcomes” and allow firms to tailor their communications to meet consumers’ needs.

The FCA said the Consumer Composite Investments (CCI) regime, if confirmed, will mean consumers getting:

• Information that is accurate, understandable and broadly comparable

• Product information that they can use it in their decision-making process

• The ability to compare investments more effectively, and more easily find the best product for their needs

The regime is aimed at any firm that manufactures or distributes a CCI to retail investors in the UK.

Under our proposed rules, a CCI is an investment where the returns are dependent on the performance of, or changes in, the value of indirect investments. This includes funds, structured products, insurance-based investment products, contracts for difference and other complex investments like derivatives.

The consultation affects consumers and consumer organisations and those who manufacture Packaged Retail and Insurance-based Investment Products (PRIIPs), Undertakings for Collective Investment in Transferable Securities (UCITS) (including overseas funds), non-UCITS retail schemes (NURS), or non-PRIIP packaged products (excluding pensions products).

The FCA says that under the current rules, introduced across Europe when the UK was in the EU, people buying investment funds were supplied with standardised documents covering prescribed information. In practice these documents were often complex, unclear and could miss important points. This could put people off investing or lead them to make less informed decisions, the FCA said. 

The FCA has proposed replacing this with a simpler and flexible system  tailored to the UK which will allow firms more choice about how, what and when they communicate. The FCA has also set out some detailed requirements where it is necessary to ensure consistency and comparability across the market to help consumers. 

Simon Walls, interim executive director of markets at the FCA, said: “The way people invest has changed. We want to ensure that firms can communicate with their customers in a way that gets them the information they need when they need it. 

“High quality product information will give consumers the confidence to invest; increased participation in this market will not only benefit consumers but will also provide capital to drive the economy and boost growth.” 

Jonathan Lipkin, director policy, strategy and innovation at the Investment Association, said: “Modernising the UK’s retail disclosure regime is fundamental to achieving a new culture of inclusive investment, where consumers feel empowered to make informed decisions that enable them to achieve their long-term financial objectives and build resilience.  

“We welcome the FCA’s consultation as an important opportunity to create a disclosure framework based on simplicity, flexibility, and digital innovation. In a Consumer Duty world, we support a customer-centric regime that provides decision-useful information in an accessible and relevant format, and that helps consumers understand investment products and compare them in a meaningful way. We look forward to working with the FCA and other stakeholders in developing this new approach." 

Stakeholders are asked to respond to the paper by 20 March.

• Read the Consultation Paper.