The government has announced that plans to reform UK retail investment disclosure rules are expected to be in place in H1 2025, subject to parliamentary approval and the Financial Conduct Authority’s (FCA) consultation process.

The Treasury has consulted on replacing the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation, which was inherited from the EU, with a new framework for Consumer Composite Investments (CCIs).

It will now lay legislation “as soon as possible” to provide the FCA with the appropriate powers to deliver the reform, with the FCA to consult on the proposed rules for the CCI regime this autumn.

From 19 September until the legislation comes into force, the FCA will not take action if an investment trust chooses not to follow the requirements of the PRIIPs Regulation, and parts of Articles 50 and 51 of the MiFID Org Regulation.

This approach is an interim measure, with investment trusts to be included within the scope of the future UK retail disclosure framework.

The new CCI regime aims to deliver more tailored and flexible rules that seek to address concerns surrounding current disclosure requirements, including for costs.

It will look to support investors to better understand what they are paying for and the value they are receiving through the distribution chain.

“The intent is that the new CCI framework will be proportionate and will allow more bespoke arrangements to address concerns that have been raised with the current PRIIPs framework,” the government stated.

“The government and FCA also welcome the feedback from the investment trust sector regarding the operation of current cost disclosure requirements and how they might be impacting the investment trust sector specifically.”

The proposed CCI regime is intended to better cater for a range of products and investment vehicles, including investment trusts, while ensuring that consumers receive appropriate information to allow them to make decisions between investment opportunities about composite consumer investments.

Following the announcement, the FCA has applied new forbearance, aiming to provide certainty for firms ahead of the legislation coming into force.

“Our forbearance will apply until the government’s statutory instrument to exclude closed-ended UK-listed investment funds from the PRIIPs Regulation and MiFID Org Regulation takes effect, as after that date those funds will no longer be bound by the requirements of that legislation,” the FCA said.

“Notwithstanding our commitment not to take supervisory or enforcement action, we cannot repeal or disapply the law and the regulations remain in force during this period. Firms may need to consider any other implications that not complying with the legislation may have for their businesses.

“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. We can act if firms do not meet these expectations.”

Commenting on the announcement, Association of Investment Companies (AIC) chief executive, Richard Stone, said: “This leap forward on cost disclosure is great news for investment companies and their investors. The temporary suspension of the rules paves the way for a permanent solution to this long-standing and damaging problem.

“It’s good that the Treasury and FCA have recognised that the current cost disclosure regime is not working. The AIC has lobbied tirelessly on this issue and it’s encouraging that the Labour government has acted so swiftly.

“We look forward to working with the FCA as it consults on the new CCI regime. It’s vital that these new rules recognise the unique characteristics of investment companies, permanently end misleading cost disclosures which distort the market, and enable investors to make better informed decisions.

“Investment companies are a great UK success story and have a vital role in bridging the gap between private assets and public markets. Ending misleading cost disclosures will enable us to continue delivering for investors and make a critical contribution to the economy as the government drives forward its ambitions for growth, investment and wealth creation.”

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