Regulatory Frequently AskedQuestions78

A target benchmark is a benchmark against which a performance target is set or where a payment out of the fund’s assets is permitted. This typically arises in the context of performance fees or similar remuneration mechanisms.

A CCI Product Summary Document is a short, standardized disclosure required under the UK’s Consumer Composite Investments (CCI) regime that provides retail investors with clear, comparable information on a product’s objectives, risks, performance, and costs.

A constraining benchmark is a benchmark that actively limits or governs how a portfolio is managed. The past performance chart (line graph) must include the Constraining and Target benchmark.

A comparator benchmark is used solely for performance comparison purposes. It does not influence portfolio construction, asset allocation, or risk limits, and does not restrict investment decisions. The Comparator benchmark may be included in the past performance chart.

A CCI is any product where the returns an investor may receive are dependent on the performance of indirect investments, meaning underlying or reference assets, rather than on assets held directly by the investor. This is similar to the definition of a PRIIP.

The product characteristics section must include key identifying details (such as the product name, ISIN or equivalent, manufacturer name, revision date and product type), a description of the investment strategy and any underlying investments, material market exposures, and any environmental or social objectives or insurance benefits. It must also set out the investment term or recommended holding period, including appropriate warnings for early withdrawal, and explain return calculations for structured products and any capital guarantees. In addition, it must cover complaints information, compensation scheme coverage, fees or penalties for early exit, and references to where further information can be found. Where the CCI invests in a fund, additional disclosures are required regarding the fund’s regulatory status, operator or AIFM, and, for feeder funds, the relationship to the master fund and any differences in returns.

Where included, the past performance section must state the year in which the CCI was manufactured, the currency used (if different from GBP, together with a warning that currency movements may affect performance), the period over which past performance is illustrated, and the source of the performance information. A line graph showing past performance must be included where past performance exists.

Each cost figure must be accompanied by a short narrative in plain English explaining the nature and content of the cost. In addition, distributors must be informed of any costs that are zero.

A minor movement in a product’s risk score that arises solely because the product sits on the boundary between two risk classes does not, in itself, require an out-of-cycle review or an update to the product summary.

FCA Policy Statement PS25/20 describes the CCI and Product summary document (PSD).

Material changes include any change to a consumer composite investment’s investment objectives or investment strategy, as well as the occurrence of market events or circumstances that the firm ought reasonably to know are capable of materially altering the investment’s risk and return information.

Product information, what is this product, costs summary, composition of costs, risk and performance information.