The Financial Conduct Authority (FCA) has launched a second consultation on consumer composite investments (CCI), seeking views on draft rules regarding transaction costs and cost disclosures.

Under the FCA’s proposed regime, a CCI is an investment where the returns are dependent on the performance of the value of indirect investments, including funds, structured products, insurance-based investment products, contracts for difference, and other ‘complex investments’ like derivatives.

In its latest CCI consultation, the FCA has proposed removing the requirement for firms to calculate and disclose implicit transaction costs.

The FCA argued that this would remove a “significant” compliance requirement for firms while ensuring consumers are still provided with the most relevant information about product transaction costs.

The regulator has also proposed simplifying overall cost disclosure by aligning other cost disclosure rules to CCI requirements, consequential amendments to other parts of the FCA Handbook as a result of the new CCI rules, and provisions for the transitional period until the CCI regime comes into full force.

“The proposals together with those in the first consultation set out the FCA’s ambition of building a new, bolder regime and it is open minded about how it can be designed in a way which best meets the needs of prospective investors,” the FCA noted.

“The FCA welcomes views through the consultation about how best to design an outcomes-focused regulation that is fit for many years to come.”

The FCA said it would continue engaging with a range of stakeholders on the issues discussed in its consultation and its wider CCI proposals to create a regime that “works for consumers and the wider market".

It plans to issue a policy statement covering both consultations with final rules in late 2025.

Commenting on the FCA's second consultation on CCIs, which closes on 28 May 2025, Association of Investment Companies chief executive, Richard Stone, said: “Today’s announcement indicates that the FCA is willing to make meaningful changes to cost disclosure.

"Abolishing the calculation of implicit costs has been a long-standing demand of the AIC and this approach is a big step forward. We hope it’s a signal that other serious problems with cost disclosure will also be addressed – specifically the pull through of underlying fund costs and the combining of different costs with different characteristics which both result in meaningless disclosures.

“The current approach to transaction costs has led in some circumstances to the disclosure of ‘negative costs’ which are confusing and nonsensical. Previous sticking plaster solutions have not removed the burden of calculating these costs which have no value to consumers and can distort disclosures.

“We also welcome the FCA’s intention to change the rules so that consumers receive cost information calculated on the same basis at every point of their investment journey.

"Currently, the pre-sale information costs are based on an estimate of future costs and the post-sale information costs are the actual expenses incurred. This results in different numbers presented at different points in the investment journey and is very confusing for consumers. It’s good to see that the FCA has recognised this.”

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