The FCA’s modification by consent of its Conduct of Business Sourcebook (“COBS”), rule 14, means that any firm that is required to provide a key investor information document (“KIID”) to a client must do so after the transaction has taken place rather than before. Initially, this modification was valid until June 2016 but it will now be made available until December 2018, subject to it not being revoked or made obsolete.The modification allows Authorised Fund Managers (“AFM”) of Non UCITS Retail Schemes (“NURS”) to produce a document which is very similar to the UCITS KIID and will be an equivalent document called the NURS Key Investor Information (“NURS KII”). The AFM must produce a fully compliant NURS KII document or continue with its current disclosure documents. Furthermore, the allowance for firms to provide the NURS KII after the transaction has taken place is subject to certain requirements i.e. the client has given instructions and the firm is not able to provide the document in good time before the transaction has concluded.

The impact of the modification by consent being made available until 2018 means that the modifications being used by managers will have to be extended through application as currently all directions relating to such modifications expire 30 June 2016.

Does the modification impact the PRIIPS regulations?

  • PRIIPs requires that investors need to be provided with a pre-investment disclosure document for certain financial products e.g. UCITS and NURS
  • although this requirement is mandatory beginning 31 December 2016, UCITS are exempt from the requirements until at least 31 December 2019 due to the already implemented requirements relating to UCITS KIIDs
  • managers had hoped that NURS would also be able to benefit from exemption through the modification by consent
  • for now, the only circumstances where the manufacturer of a NURS would not be required to produce a PRIIPS KID by 31 December 2016 is if the effective date of the PRIIPS regulation is postponed
  • as a result, the FCA PRIIPS consultation paper which is due to be released this summer is greatly anticipated in the hope of shedding some light on the efficacy of the extended modification by consent

If you would like to take advantage of the modification by consent you will need to get in touch with the FCA who will confirm that the modification has been granted and published the modification direction on their website.

If you need advice…Cleveland & Co, your external in house counsel, are here to help.