The Financial Conduct Authority has asked for views on what information investors should be given when they buy an investment product.
In a consultation published today (December 13), the regulator has requested feedback on what should replace the disclosures currently required by the packaged retail investment and insurance products regime (Priips) and undertaking of collective investment in transferable securities rules (Ucits), which will be revoked under the Edinburgh Reforms.
The FCA is responsible for designing and developing new rules which govern disclosures given to investors to support them to make informed investment decisions.
This includes how much information to include about costs and charges, and level of investment risk.
Executive director of markets at the FCA, Sarah Pritchard, said the current rules make it very difficult for consumers to get the information they need in the way they need it to help them make effective investment decisions.
“We now have the flexibility to design a new regime which is less rigid and more focused on the outcome we are seeking – we want consumers to have the confidence to invest and understand the levels of risk involved.
“This discussion paper aims to seek views from industry and consumers to help us design a disclosure regime that delivers to support that aim, and we welcome views from across the market to help us do so.”
Just 3 per cent of retail investors read regulated pre-contractual fund disclosure documents, according to the FCA, which it said indicates that the existing retail investment disclosure framework is "not supporting good customer outcomes".
The regulator added that retail disclosure can provide retail investors with the necessary information to make informed, effective decisions and allows product managers to highlight the features of their products, facilitating competition and building trust.
The FCA is seeking views on who should have responsibility for producing these disclosures, as well as how flexible the content should be within them.
This includes whether information should be “layered”, where firms produce some information upfront and then more details later on in the investment process, and how much thought to give on what information should be given at different stages of the process.
The FCA highlighted its awareness of 'anchoring bias', which is a behavioural bias that causes people to give more weight to the first piece of information received.
"We want to align the delivery of information with the consumer journey, ensuring information is provided when it will be useful to consumers," the regulator said.
It also includes how the information is presented, including whether disclosures should be formatted in a way that can be easily processed by a computer, enabling comparisons to be made.
