DISC 1A.1 Purpose and application

(1) This sourcebook sets out rules and guidance for authorised persons and unauthorised persons who are manufacturers or distributors of consumer composite investments.

(2) The rules and guidance relate, in particular, to the content of and manner in which information relating to consumer composite investments must be prepared and disclosed to retail investors.

The rules and guidance in DISC replace analogous requirements previously imposed by:

1. (1) the UK version of Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs); and

2. (2)

    the European Parliament and Council Directive of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (No 2009/65/EC) and the UK version of the Commission Regulation (EU) No 583/2010, specifying the form and contents of key investor information.

The core obligations in DISC are that, in respect of a consumer composite investment that is or may be distributed to retail investors in the UK:

1. (1)

    a manufacturer must prepare a product summary and provide it to the distributor(s), along with the underlying core information disclosures, in good time before the consumer composite investment is made available for distribution to retail investors (see DISC 2A.2.1R); and

2. (2)

    a firm must not distribute a consumer composite investment to a retail investor without providing a product summary (see DISC 2A.3.1R).

This sourcebook applies to an authorised person and to an unauthorised person in relation to activities carried on in relation to a consumer composite investment that is or may be distributed to a retail investor in the United Kingdom.

In this sourcebook, a retail investor is:

(1) a person to whom an investment is sold, or who is the recipient of an offer about or advice on an investment, and who is or would be categorised as a retail client under the rules in COBS 3; or

(2) a person who would meet the criteria in (1) if the selling, offer or advice on an investment involved the carrying on of a regulated activity or a controlled activity.

1. (1)

    In DISC, references to a firm also include a person who is not authorised to carry on regulated activities but carries on an activity specified as a designated activity by regulation 5 of the Consumer Composite Investments Regulations.

2. (2)

    The rules in DISC do not apply in relation to a consumer composite investment where it is distributed to investors who are not retail investors, or who are not in the United Kingdom.

This sourcebook applies to Gibraltar-based firms and TP firms in relation to activities carried on in relation to a consumer composite investment that is distributed or offered to a retail investor in the United Kingdom.

In relation to an unauthorised person, this sourcebook only imposes obligations to the extent that:

1. (1)

    the relevant consumer composite investment falls within the definition set out in regulation 4; and

2. (2)

    the obligation relates to an activity specified as a designated activity by regulation 5,

3. of the Consumer Composite Investments Regulations.

1. (1)

    Regulation 5 of the Consumer Composite Investments Regulations specifies the following activities as designated activities under section 71K of the Act:

   1. (a)

       manufacturing a consumer composite investment which is, or is proposed to be, made available to a retail investor located in the United Kingdom;

   2. (b)

       advising on a consumer composite investment if the advice is given to a retail investor located in the United Kingdom, or an agent for that investor

   3. (c)

       offering a consumer composite investment to a retail investor located in the United Kingdom; and

   4. (d) selling a consumer composite investment to a retail investor located in the United Kingdom.

2. (2)

    Regulation 6 of the Consumer Composite Investments Regulations confers the power on the FCA to make rules in respect of those specified activities, including in relation to unauthorised persons.

3. (3)

    This supplements the FCA's other powers under the Act and enables it to make rules in relation to consumer composite investments that apply to both authorised persons and unauthorised persons.

In this sourcebook, reference to an unauthorised person includes an EEA UCITS scheme recognised by virtue of regulation 62 of the Collective Investment Schemes (amendment etc.) (EU Exit) Regulations 2019.

The rules and guidance in GEN 1.3, GEN 2.1, GEN 2.2.1R to GEN 2.2.16G, and GEN 2.2.18R to GEN 2.2.25G apply to manufacturers and distributors who are not authorised persons as they apply to authorised persons.

The obligations in DISC do not apply in respect of a manufacturer of a consumer composite investment where the manufacturer has taken reasonable steps to ensure that:

1. (1)

    the offer and any associated communications about the consumer composite investment (including the prospectus, if there is one):

   1. (a)

       feature prominent and clear disclosures to the effect that the consumer composite investment is being offered only to investors who are or would be categorised as professional clients or eligible counterparties under the FCA's rules in COBS 3, and is not intended for retail investors; and

   2. (b)

       are directed only to investors eligible for categorisation as professional clients or eligible counterparties under the FCA's rules in  COBS 3; and

2. (2)

    the distribution strategy and arrangements with distributors for the consumer composite investment are appropriate in light of the non-retail target market.

Where a manufacturer complies with DISC 1A.1.12R, the manufacturer is not required to prepare a product summary and is not otherwise subject to obligations in DISC.