On 7 October 2024, the draft Packaged Retail and Insurance-based Investment Products (Retail Disclosure) (Amendment) Regulations 2024 (the draft Regulations) were published on legislation.gov.uk, along with a draft explanatory memorandum.
The Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation is part of assimilated law that was transferred into UK law in 2018. The Regulation was originally introduced in the EU to standardise disclosure across a wide range of financial instruments marketed to retail investors across the EU. It sets out detailed and prescriptive requirements for disclosing costs, risks and performance which have been criticised by industry for being misleading and burdensome. The UK Government has therefore committed to repeal and replace the PRIIPs Regulation.
Investment trusts are currently subject to disclosure rules under the PRIIPs Regulation and other assimilated EU law such as the MiFID Org Regulation, including a requirement to disclose an aggregated cost to clients. The draft explanatory memorandum to the draft Regulations explains that it is broadly accepted by industry and the Government that the single aggregated figure that is being produced under current EU-inherited rules is not an accurate representation of the actual cost of investment in shares in an investment trust.
To address this, the draft Regulations use powers under section 3 of the Financial Services and Markets Act 2023 to amend the PRIIPs Regulation and MiFID Org Regulation, to exclude investment trusts from the requirement to disclose an aggregated cost to clients. This change will be made immediately, meaning that investment trusts, and persons advising on or selling shares of investment trusts, will no longer be required to provide a standardised Key Information Document to retail investors, and will not have to provide a single aggregate figure of costs to clients.
The PRIIPs Regulation is intended to be replaced by a new UK retail disclosure regime for consumer composite investments.