Regulatory Frequently AskedQuestions86

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. 

The line graph must show the performance of a £10,000 investment, or an equivalent amount in another currency that is divisible by 1,000. It must include at least one data point per month, with the last day of each month included in the time series. The x-axis must be expressed in calendar years (or parts thereof), and the y-axis must be linear, showing values as whole-number amounts.

The manufacturer must retain a copy of the product summary for each consumer composite investment once it has been prepared, as well as after any subsequent reviews, amendments, or updates. Each version of the product summary must be kept for a minimum period of three years.

Under the CCI, manufacturers are required to provide standardised underlying product information in a machine-readable format to support distributors’ disclosures, unless the firm is the sole distributor of its own products, in which case a machine-readable file is not required.

Where performance fees or carried interest apply, the product summary must include at least one illustrative example showing how much the performance fee and/or carried interest could amount to, based on a hypothetical £10,000 investment and reasonable assumptions about the performance of the CCI. A CCI is also considered subject to a performance fee or carried interest where it invests in one or more investments to which such fees apply.