Earlier this year the FCA published a Discussion Paper on smarter consumer communications in which it set out a commitment to drive improvements in the effectiveness of communications to consumers. In the Discussion Paper the FCA also outlined an intention to consult on removing a number of existing disclosures that have not been effective in terms of informing consumers about a product or service.
The FCA has now published Consultation Paper 15/32: Smarter Consumer Communications: Removing ineffective disclosure requirements in our Handbook (CP15/32). In CP15/32 the FCA sets out the following proposals to:
- remove the requirement for firms to produce a ‘Consumer-Friendly Principles and Practices of Financial Management’ (CFPPFM) document. This is a customer disclosure document that sets out the firm’s approach to managing and operating its with-profits business, including its approach to setting bonus rates, smoothing, and market value reactions. The FCA has received feedback that this disclosure document has not been as successful as first expected in terms of increasing the transparency of with-profits business. Few consumers read the document and, those who do, find it difficult to understand;
- delete the requirement on firms to produce a short report. The FCA’s rules require authorised fund managers to prepare an annual report and a half-yearly short report for each UCITS scheme and non-UCITS retail scheme that they manage. The short report includes relevant information about the performance of the authorised fund. The content of the short report is prescribed by COLL 4.5.5R. The FCA has received feedback that the short report does not meet the original aim of providing clear and focused information about funds;
- delete the templates for the Initial Disclosure Document (IDD) and Combined Initial Disclosure Document (CIDD). The FCA reports that its previous experience of these documents was that customers were making little use of them which led to the regulator changing its rules so that firms were not required to give them out but the templates for them remained as guidance suggesting one way to meet relevant disclosure requirements. The FCA is now concerned that the templates create a risk that firms adopt a ‘tick-box’ approach to their disclosure obligations. It is also concerned that whilst the templates are guidance they may still be viewed by firms as a constraint on finding new ways of engaging consumers on key messages. Firms might continue to present information in the same way set out in the templates, but will no longer be able to use the Key Facts Logo after the proposed new rules come into force; and
- delete the template for the Services and Costs Disclosure Document (SCDD). The FCA states that evidence suggests that the template leads to duplicated information to consumers and firms adopting a tick-box approach to these disclosures rather than considering how disclosure of services and costs can be best delivered. Firms will be able to continue to present information in the same way as set out in the templates but will no longer use the Key Facts Logo once the new rules come into force.
The deadline for comments on CP15/32 is 18 December 2015. The FCA states that it intends to publish final rules in a Policy Statement in early 2016.
View FCA proposes changes to encourage better customer communications, 22 October 2015