Home FCA Handbook DISC DISC 1A DISC 1A.2 Scope rules
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DISC 1A.2 Scope rules

06/04/2026R
  1. (1) The following are consumer composite investments:

    1. (a)

       a structured deposit;

    2. (b)

       a structured product;

    3. (c) a structured finance product;

    4. (d)

       a security or financial instrument which is or embeds a derivative, or which includes features equivalent to a derivative contract;

    5. (e) a debt security which meets the criteria in DISC 1A.2.2R;

    6. (f)

       a security issued by a fund, or rights to or interests in such a security;

    7. (g) a contingent convertible security;
    8. (h) a contract for differences;
    9. (i) an insurance-based investment product; and
    10. (j) any other investment where the returns are dependent on the performance or changes in the value of indirect investments.
  2. (2) For the purposes of (1)(j):
    1. (a) investment returns include, in particular, payment or repayment obligations to the investor, the maturity value or surrender value of a policy, changes in the value of a unit, and the resale value of a security on a secondary market;
    2. (b) the investment return is dependent on performance or changes in the value of indirect investments if it is wholly or predominantly linked to, contingent on, sensitive to or otherwise determined at least in part by the actual or anticipated performance or changes in value;
    3. (c) indirect investments are one or more investments or assets, including in particular assets held or operated for investment rather than commercial purposes, which are not purchased or held by the investor directly or at all; and
    4. (d) it is immaterial whether the performance or changes in value are measured directly or via one or more market index or indices.

Consumer composite investment debt securities

06/04/2026R
  1. (1) A debt security is a consumer composite investment if the level of interest payable, any conditionality of principal repayment, or the issuer's default risk, is linked to or materially dependent on one or more of the following, whether or not modified by a pre-determined formula:
    1. (a) fluctuations in reference indices or benchmarks relating to investments or a class of investments– for example, a stock market index;
    2. (b) the value or performance of a financial instrument or a basket of financial instruments, or one or more specified commodities or foreign exchange rates; or
    3. (c) the value or performance of investments held by the issuer or by a person connected to the issuer.
  2. (2) For the avoidance of doubt, the following are excluded from (1)(a):
    1. (a) the Bank of England official Bank Rate or any equivalent rate from another central bank;
    2. (b) any benchmarks or indices tracking the rate of inflation;
    3. (c) the Sterling Overnight Index Average (SONIA), or any other equivalent risk-free reference rate in any currency; and
    4. (d) the Euro Interbank Offered Rate (EURIBOR) or any similar Interbank Offered Rate.
  3. (3) In (1)(c):
    1. (a) examples of investments include one or more derivatives, real estate holdings, a pool of receivables, one or more financial instruments or a portfolio of financial instruments; and
    2. (b) a person is connected to the issuer if it is a member of the same group as the issuer, has a relevant business relationship with the issuer or otherwise does not have an arm’s-length relationship with the issuer.

Non-consumer composite investment debt securities

06/04/2026R
  1. (1) Insofar as it might meet the description of a consumer composite investment as set out in DISC 1A.2.1R(1)(j), a debt security meeting all the following conditions is excluded from being a consumer composite investment:
    1. (a) it does not fall within DISC 1A.2.2R(1);
    2. (b) the issuer's default risk is wholly or predominantly determined by the economic performance of the commercial or industrial activities of the issuer (or, where the debt security is guaranteed by a group person, that person); and
    3. (c) the terms of the debt security do not impose any modification, structuring or conditionality on the issuer's obligation to pay interest or repay the principal, save for the effect of any feature listed under DISC 1A.2.4R.
  2. (2) For avoidance of doubt, the activities of an issuer that pools loan agreements or debt securities, or which is engaged in any form of securitisation, are not commercial or industrial activities for the purposes of (1)(b).

Debt securities – neutral features

06/04/2026R
  1. Inclusion of a feature listed below does not cause a debt security to become a consumer composite investment in DISC 1A.2.1R(1)(j) or DISC 1A.2.2R(1), nor to be excluded from being a consumer composite investment under DISC 1A.2.3R:
  2. (1)  a fixed coupon rate, including where:
    1. (a) a set coupon rate applies until maturity, including a nil or zero rate; and
    2. (b) the coupon rate is subject to pre-defined changes at fixed times prior to maturity (that is, a stepped coupon);
  3. (2) a floating or variable coupon, provided that:
    1. (a) the interest payable is determined by an index or benchmark of the kind described by DISC 1A.2.2R(2), with or without a spread reflecting the credit risk of the issuer; and
    2. (b) the interest payable is not subject to any additional modification or structuring such as, for example, a cap, or a floor other than zero;
  4. (3) a put option giving the investor a discretion to demand early repayment of the debt security on pre-agreed terms, or giving the investor the choice to convert or exchange their debt security into one or more shares of the same issuer at a pre-determined price;
  5. (4) a call option allowing the issuer to redeem a debt security early at a price higher than or equal to par, where:
    1. (a) the option is exercisable otherwise than in response to fluctuations, price movements or performance of an index, benchmark, specified asset or underlying asset falling within DISC 1A.2.2R(1); and
    2. (b) the mechanism to calculate the cash repayment amount is made clear to the investor in the terms of the debt security;
  6. (5) a perpetual or indefinite term; or
  7. (6) the debt security's subordination in the creditor hierarchy in the event of the issuer's insolvency.
06/04/2026G
  1. (1) DISC 1A.2.2R sets out the kind of debt security that is a consumer composite investment.
  2. (2) DISC 1A.2.3R sets out the kind of debt security that is excluded from being a consumer composite investment.
  3. (3) DISC 1A.2.4R sets out the sorts of features of a debt security that are neutral for the purposes of determining whether it meets the criteria for a consumer composite investment.

Other exclusions

06/04/2026R
  1. Insofar as they would or might meet the description of a consumer composite investment as set out in DISC 1A.2.1R(1)(j), the following are excluded from being a consumer composite investment:
  2. (1) a plain vanilla listed bond;
  3. (2) a long-term insurance contract where the benefits under the contract are payable only on death or in respect of incapacity due to injury, sickness or infirmity;
  4. (3) a pure protection contract;
  5. (4) a deposit, other than a structured deposit;
  6. (5) non-equity transferable securities meeting the criteria set out in regulation 4(2)(c), (d) and (e) of the Consumer Composite Investments Regulations;
  7. (6) non-fungible shares of capital whose main purpose is to provide the holder with a right to occupy any immovable property or a part thereof and where the shares cannot be sold without this right being given up;
  8. (7) a pension scheme, including a stakeholder pension scheme;
  9. (8) a pension annuity;
  10. (9) a funeral plan product;
  11. (10) shares in the capital of any central bank;
  12. (11) transferable securities meeting the criteria set out at paragraphs (l) and (m) of regulation 4 of the Consumer Composite Investments Regulations;
  13. (12) a unit in an ACS or in a qualified investor scheme; and
  14. (13) an equity share (commercial company), or an equivalent share listed on an overseas investment exchange.