Global Trustee and Fiduciary Services Bite-Sized Issue 10 2024

7 QUICK LINKS CBDC CRYPTOASSETS FINTECH LIBOR TRANSITION OPERATIONAL RESILIENCE PRIIPS SUSTAINABLEFINANCE/ESG T+1 ASIA/PACIFIC EUROPE NORTH AMERICA UNITED KINGDOM Global Trustee and Fiduciary Services Bite-Sized | Issue 10 | 2024 PRIIPS Reforms to Financial Services Retail-disclosure Requirements On 19 September 2024, the Financial Conduct Authority (FCA) and UK Government announced plans to reformUK retail disclosure rules and their intention to temporarily exempt investment trusts from assimilated EU law requirements. The FCA states that, following a consultation on replacing the EU-inherited Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation with a new framework for Consumer Composite Investments (CCIs), HM Treasury will lay legislation “as soon as possible” to provide the FCA with the appropriate powers to deliver this reform. The UK’s new retail disclosure regime is expected to be in place in H1 2025, subject to Parliamentary approval and the FCA’ own consultation process. The FCA states that it intends to consult on proposed rules for the CCI regime during autumn 2024. Link to Statement here Statement on Forbearance in Relation to Investment Trust Disclosure Requirements On 19 September 2024, the FCA issued a statement setting out its forbearance as a result of the UK Government’s intention to exclude some investment trusts from the PRIIPs Regulation and other assimilated law. The FCA states that, based on concerns highlighted by industry representatives about the operation of current costs disclosure requirements under assimilated law, and how it is affecting the closed-ended listed investment fund sector, the UK Government has decided to lay the legislation to exempt closed-ended UK-listed investment funds from the requirements of the current PRIIPs Regulation and parts of Articles 50 and 51 of the MiFID Org Regulation. That exemption will remain in effect until the start of the new UK retail disclosure framework (see above), subject to Parliamentary approval of the CCI legislation and the FCA’s consultation process for the CCI regime. The FCA states that, until the legislation comes into force, it will apply regulatory forbearance meaning that closed-ended investment funds whose ordinary shares (of each class if there is more than one) are admitted to trading on a UK regulated market or a UK multilateral trading facility may choose not to follow the requirements of the PRIIPs Regulation and associated technical standards. They may also choose not to follow the requirements of Article 50(2)(b) and Article 51 of the MiFID Org Regulation. The FCA confirms that it will not take supervisory or enforcement action if a fund chooses not to follow those requirements. The FCA states that firms must still continue to comply with other relevant rules and regulations. This includes the Consumer Duty and Principle 7, which requires firms to ensure communications are fair, clear and not misleading. Firms also need to comply with the requirements in COBS 2.1.1R to act honestly, fairly and professionally in accordance with the best interests of clients. The FCA states that it can act if firms do not meet these expectations. On 30 September 2024, the FCA updated its forbearance statement, stating that “the implication of the forbearance is that it applies along the distribution chain to any firm carrying on business relating to these products, including manufacturing, distribution or marketing. All firms must continue to comply with other relevant rules and regulations including the Consumer Duty and the requirements to ensure communications are fair, clear and not misleading. Firms also need to comply with the requirements in COBS 2.1.1R to act honestly, fairly and professionally in accordance with the best interests of clients.” The FCA says that this means that firms across the distribution chain will need to consider what approach will deliver good outcomes for their retail clients. And also, that “distributor firms, or any firm preparing communications for retail customers, are also subject to Consumer Duty obligations relating to meeting the information needs of retail customers.”