The Financial Conduct Authority (FCA) has published final rules on PRIIPs, clarifying which investment vehicles will be exempt from the new regulations.
In a paper entitled PS 17/16 FCA's disclosure rules following application of PRIIPs regulation, the regulator laid out which products will be affected following feedback to its consultation paper issued last July.
Europe-wide PRIIPs (Packaged Retail and Insurance-based Investment Products) legislation requires firms to prepare, publish and provide a Key Information Document (KID) for each PRIIP manufactured.
This will need to be no more than three pages long and contain specific information such as product descriptions, how long the product should be held and how much it costs.
However, implementation of the regime was delayed until 1 January 2018 as the European regulatory authorities disagreed about what information should be included in the documents.
Now, with eight months to go until implementation, the FCA has clarified which products will come under the remit of the new rules.
In particular, it said investment trust savings schemes (ITSS) will not be classed as PRIIPs but the underlying trusts held within the scheme will be included.
Meanwhile, ISAs will not come under the scope of PRIIPs requirements for which a KID is required (although products held within an ISA may well be PRIIPs for which the ISA manager will need to provide the account holder with a KID in accordance with the regulation).
Also, when a client invests in a PRIIP within an ISA tax wrapper, any costs or charges associated with the provision of the ISA will need to be disclosed in a separate document, if not reflected in the costs disclosed in the KID.
"We take the view that, although securities in investment trusts acquired through an ITSS are likely to be PRIIPs for which a KID is required, the scheme itself will not be a PRIIP," the FCA said.
"Meanwhile, we take the view that an ISA itself is not an investment for the purposes of the PRIIPs definition and does not expose the retail investor to fluctuations based on exposure to reference values or to the performance of one or more assets that they have not directly purchased (the account holder retains beneficial ownership of any investments in an ISA)."
In general, the provision of a dealing, portfolio management or custody service will not be a PRIIP, although investments acquired through such services will often be included.
Pension products were also likely to be classed as being non-PRIIPs as well as assets held directly by the retail investor, such as corporate shares and sovereign bonds.
However, the FCA said most venture capital investments, including VCTs, will fall within the definition of a PRIIP.
Meanwhile, the FCA said it would consult separately during 2017 on what enforcement actions would be taken against firms who breach PRIIPs rules.
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