New Financial Services Bill sets direction of travel for post-Brexit UCITS/PRIIPs landscape

Rishi Sunak's new Financial Services Bill sets the tone for PRIIPs/UCITS reporting in 2021

19 November 2020

The new Financial Services Bill 2019-21, which is currently going through the House of Commons, clearly sets out the government’s preferences as to how the UCITS and PRIIPs regimes will progress post-Brexit, leading fund data company FE fundinfo has said.

Mikkel Bates, Regulations Manager at FE fundinfo, said that the proposed extension to the UCITS PRIIPs exemption within the Bill demonstrated that the government is content with how the UCITS regime is functioning overall.

Bates said:
“With the current UCITS KIIDs exemption deadline fast approaching, UK-domiciled funds were facing a considerable amount of uncertainty, given the government had previously only said it would look at the disparity of PRIIPs KIDs reporting ‘when Parliamentary time allowed’. The Bill, which is being sponsored by the Chancellor Rishi Sunak, has now clarified that UCITS KIIDs won’t disappear until they can be replaced by something equally good, which will be a welcome relief to many UK-based fund managers. The message here seems to be clear: the government is content that UCITS KIIDs are performing as they should, are recognised beyond the EU’s regulatory framework and that they will not force funds looking to operate in the UK into the PRIIPs regime until its shortcomings are resolved.”

Beyond the specifics concerning PRIIPs KIDs and UCITS KIIDs, the Bill also appears to pre-empt a lack of equivalence with the EU following the end of the Brexit transition period in January 2021 and could be seen as an attempt to make the UK a welcoming environment in attracting inward investment from foreign funds.

Mikkel Bates added:
“In the run up to the end of the transition period, there is understandably a lot of politicking taking place between London and Brussels and a lot still could happen between now and the end of December. Nonetheless, it seems the Financial Services Bill appears to be both an attempt for the UK to clearly set out its future approach towards international funds and as a pushback to the EU that it is prepared to be pragmatic and flexible when it comes to implementing changes which might not be beneficial.”

The Financial Services Bill 2019-21 is currently at the second reading stage in the House of Commons and it is not anticipated to encounter any serious amendments or opposition in its progress through Parliament.