Wealth management trade body PIMFA has welcomed plans announced by the FCA this week to establish a new regime for Consumer Composite Investments (CCIs) which could affect up to 12.6m UK investors.

The FCA announced plans to consult on a new post-Brexit regime for Consumer Composite Investments (CCIs), following an initial consultation last year.

The regulator wants to introduce new rules covering firms that make or distribute CCIs to retail investors in the UK.

The new regime would cover funds, structured products, insurance-based investment products, contracts for difference and investments such as derivatives.

The FCA said its aim was to make the regulatory regime covering these investments “simpler and flexible” to boost investment.

Simon Harrington, head of public affairs at PIMFA, said: “These new proposals are a welcome step in the right direction. We’re pleased to see that the approach being proposed here takes on board the feedback we shared as part of our response to the FCA’s initial consultation.

“Our concern with the initial CCI regime proposals was that they were overly complex and prescriptive, and didn’t move things on from previous PRIIPs (Packaged Retail Investment and Insurance-based Products) requirements enough. In particular, we had highlighted a lack of clarity for firms on what the regulator was proposing around MiFID (Markets in Financial Instruments Directive) related activity as well as transaction costs.

“It is therefore extremely encouraging to see FCA's movement on this issue and its intention to remove the requirement for firms to disclose implicit transaction costs as part of its costs disclosures. We will continue to study these proposals in consultation with members but on first reading, the new approach to transaction costs in particular should support the regulator’s overall aim of reducing the risk of misleading consumers and distorting fund manager behaviour.”

The FCA said this week that the plan to replace current EU rules would affect more than 12.6 million UK investors (23% of adults) who hold an investment in the CCI area.

The consultation will cover areas such as:

• Removing the requirement for firms to calculate and disclose implicit transaction costs. This would remove a significant compliance requirement for firms, while ensuring that consumers are still provided with the "most relevant information" about product transaction costs.   
• Simplifying overall cost disclosures by aligning other cost disclosure rules to CCI requirements.
• Consequential amendments to other parts of the FCA Handbook that result from the new CCI rules.  

Stakeholders are invited to respond to the paper by 28 May.