Regulatory Frequently AskedQuestions78

The CCI distinguishes between three types of benchmarks: constraining benchmarks, comparator benchmarks, and target benchmarks.

The time series used for risk calculation must be based on either weekly or monthly returns. Weekly data uses a frequency of m = 52 with T = 520 observations, while monthly data uses m = 12 with T = 120 observations. If the investment, or its underlying or reference assets, are priced less frequently than once per month, the consumer composite investment must be assigned a risk and return score of at least 9.

Besides risk, return, and costs, the KID covers: the recommended holding period, insolvency protection, complaints procedures, and links to supporting documents (for some products like UCITS).

The CCI Product Summary Document includes numerical data such as the risk indicator score (1 to 10), past performance information and cost figures.

Distributors are responsible for making the manufacturer’s product summary available to investors and delivering it unaltered in a durable medium at the point of sale or shortly after. Distributors may not create or amend product summaries themselves.

Before a sale, distributors must ensure that consumers who would find it useful have access to the product summary and must highlight the key information needed to make a properly informed decision, including a brief description of the product, its ongoing and relevant costs, and its risk and return score.

While distributors cannot modify the product summary, they may use the manufacturer’s machine-readable underlying data to build consumer journeys and communications that meet investors’ information needs. The machine-readable information must be accessible on the manufacturer’s website.

Manufacturers should make core information disclosures available free of charge in an easily accessible location on their website, in a machine-readable electronic format that can be automatically processed by a computer without specialist software. In practice, this is expected to be similar to existing EMT and EPT formats.

This is a common question that many hesitate to ask. Here’s a simple breakdown:

EU Transaction Costs: Here the overall value of the transaction cost is floored at the level of the explicit transaction cost. Negative implicit transaction costs, Anti-Dilution Levies (ADL) or Swing Proceeds can not bring the total transaction cost below the explicit cost. If explicit costs are zero, the total transaction costs disclosed will be at least zero as well and cannot be brought below zero.

UK Transaction Costs: If the explicit and implicit costs combined are positive, the ADL can be substracted but it cannot bring the total cost below zero. Hence in this case a floor of zero applies. However, if the explicit and implicit costs combined are already negative, no ADL can be further deducted and it cannot impact the total transaction cost to become more negative or further below zero. Please note that in the latter case, the total reported UK transaction cost can be negative. Note that the FCA released a new CCI proposal that will make the implicit transaction cost no longer required for UK Product Summary Documents.

Both are 1–7 risk scales derived from volatility calculations, but they use different methodologies and formulas to measure that volatility.

Category III instruments are structured products with non-linear payoffs. Category IV is a fallback category used for instruments whose payoff depends on non-observable parameters.

The FCA CCI (Consumer Composite Investments) regime is the UK framework that replaces PRIIPs/UCITS disclosures, requiring firms to provide a Consumer Composite Investments Product Summary Document (PSD) with clear, comparable information for retail investors.

A UCITS KIID (Key Investor Information Document) is a short, standardized document required under EU rules that gives investors clear, comparable information about a UCITS fund’s objectives, risks, costs, and past performance.

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.