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.

As of January 2025, the transaction cost calculations covers the period 2022 up to 2024. Therefore, it is indeed possible that those who started collecting arrival timestamps in 2024, they are still missing this important datapoint for the initial part of the period where transactional data is available. In such a case, one has to deal with several missing arrival timestamps, in which case one must follow the PRIIPs RTS-prescribed waterfall method:

First: Use a justifiable independent price as arrival price if available.

If unavailable: Use the opening price of the same day.

If still unavailable: Use the closing price of the previous day.

Ultimate fallback: Apply the half-spread for the asset class to which the instrument belongs.

Clarification on arrival timestamps: it should equal the time when an order to transact is transmitted to another person. There are the four key timestamps which should be distinguished:

Order timestamp: When the order is created/accepted by the submitting system (e.g., trader/OMS/EMS). Applies to any order type (market, limit, stop, etc.).

Arrival timestamp: When the order arrives at the execution venue or broker’s execution system (i.e., when it becomes actionable for routing/execution).

Execution timestamp: When an execution (fill) occurs, i.e., when the trade is matched/filled.

Settlement date: The contractual date when delivery-versus-payment occurs: securities are delivered and cash is paid.

For regular market orders, the order timestamp equals (approximately) the arrival timestamp. However, for limit orders, these can differ significantly. Hence it is important for the PRIIPs regulation to use the prescribed arrival timestamps. 

The regulation requires a “waterfall” approach: (1) use underlying NAV Data (time series) (2) use NAV of shareclass within same subfund with longest time series (reference share class) (3) use prices of benchmark/basket. Important to use the same time series for both risk s performance scenario calculations.

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).

The KID shows four scenarios: stress, unfavorable, moderate, and favorable. These are based on historical data and illustrate possible outcomes, but are not predictions. All scenarios are shown net of costs and assume reinvestment of dividends/income. Structured products obtain their performance scenarios via Monte Carlo simulation.

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.

Transaction costs are explicit costs or charges incurred when buying or selling investments. They must be calculated on an annualised basis, using an average of transaction costs over the previous 36 months. Where the fund has existed for less than three years, transaction costs must be calculated on a reasonable alternative basis.

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