DISC 6 Costs and charges information

1. (1) The costs and charges information comprises all direct and indirect costs and charges associated with a consumer composite investment, expressed as:
   1. (a) the one-off entry costs figure;
   2. (b) the one-off exit costs figure;
   3. (c) the ongoing costs figure;
   4. (d) the transaction costs figure; and
   5. (e) performance fees and carried interests.
2. (2) The costs and charges information must be assessed, categorised, calculated and disclosed in accordance with the requirements of this chapter.
3. (3) The requirement in (2) is modified in relation to performance fees and carried interests, as applicable, which must be assessed, categorised and disclosed but need not be calculated.
4. (4) The costs and charges information also includes the explanations, descriptions or additional information required under DISC 6.3.2R and DISC 6.3.6R.

1. (1) All direct and indirect costs and charges (with the exception of performance fees and carried interests) associated with an investment in a consumer composite investment must be allocated to one of the following categories:
   1. (a) one-off entry costs;
   2. (b) one-off exit costs;
   3. (c) ongoing costs; and
   4. (d) transaction costs.
2. (2) In allocating costs and charges in accordance with (1), a manufacturer must not allocate the same cost or charge to more than one category.

The method for assessing costs and charges which are performance fees and carried interests is set out in DISC 6.3.6R.

All costs and charges categorised in accordance with DISC 6.1.2R must be calculated by a manufacturer:

1. (1) using the applicable assumed investment amount;
2. (2) for the preceding 12-month period; and
3. (3) on a gross basis, such that the costs and charges calculation takes account of all relevant taxes including, but not limited to, any stamp duty or similar tax.

DISC 6.2.1R(2) is modified:

1. (1) in the case of transaction costs, which must be calculated in accordance with the requirements in DISC 6.5;
2. (2) where DISC 6.2.4R or DISC 6.2.6R applies;
3. (3) in respect of costs or charges for the subsequent 12-month period which are fixed or otherwise known in advance, in which case, a manufacturer must use those costs and charges; and
4. (4) where a consumer composite investment has a maturity of under 12-months, in which case, a manufacturer must calculate the costs and charges over the life of the product.

In relation to a consumer composite investment priced or denominated in a currency other than pounds sterling, the costs and charges must be calculated in pounds sterling and accompanied by a statement of the exchange rate used to calculate them.

1. (1) This rule applies where a manufacturer identifies that the costs and charges information under DISC 6.1.1R requires adjustment in order to comply with its obligations in DISC 2A.1.4R or DISC 3.1.2R because the manufacturer expects, on reasonable grounds, that future costs and charges will be materially different from those calculated for the preceding 12-month period.
2. (2) Where (1) applies, the manufacturer may adjust the calculation of the costs and charges associated with the investment in a consumer composite investment as reasonably necessary to ensure the costs and charges information is not misleading and otherwise complies with DISC 2A.1.4R and DISC 3.1.2R.

An example of a future cost or charge being materially different for the purposes of DISC 6.2.4R(1) is where the manufacturer is aware that the amount of any fee payable to a management company, depositary or custodian will change from what was charged during the preceding 12-month period.

1. (1) This rule applies in relation to a consumer composite investment which has been operating for less than 12 months, and for which some or all costs and charges for a full 12-month period are not yet known.
2. (2) When calculating costs and charges in the circumstances described in (1), the manufacturer must estimate the costs and charges for a 12-month period based on:
   1. (a) the costs or charges set in agreements relating to the consumer composite investment;
   2. (b) the level of costs and charges already incurred, if any; or
   3. (c) where costs and charges are not set in agreements or none have yet been incurred, on its reasonable expectation of the amount of those costs and charges.
3. (3) The requirement in (2) does not apply in respect of transaction costs, which must be calculated in accordance with DISC 6.5.2R.
4. (4) The manufacturer must keep the accuracy of any costs and charges figure calculated under (2) or (3) under review and must, in carrying out the review in DISC 3.2.2R, update and replace any costs and charges information based on the calculation in (2) or (3) with costs and charges information calculated in accordance with DISC 6.2.1R and DISC 6.2.2R.

When estimating costs and charges in accordance with DISC 6.2.6R(2), a manufacturer may base its estimates on the costs and charges associated with an investment in a reasonably comparable consumer composite investment.

Where the manufacturer of an insurance-based investment product pays retail investors a share of its profits, the manufacturer may calculate its ongoing costs and transaction costs net of that profit share.

1. (1) The manufacturer must clearly and prominently include in the product summary each of the following figures, expressed as a percentage of the applicable assumed investment amount and as a cash amount rounded to the nearest pound sterling:
   1. (a) the one-off entry costs figure;
   2. (b) the one-off exit costs figure;
   3. (c) the ongoing costs figure; and
   4. (d) where applicable, the ongoing costs of any investee closed-ended investment funds.
2. (2) The obligation in (1) does not apply where the figure is zero.

The manufacturer must provide in the product summary a concise, plain English description of the nature and content of each figure in DISC 6.3.1R, as applicable.

The manufacturer must provide written confirmation to a distributor where any of the figures referred to in DISC 6.3.1R are calculated as zero, confirming that:

1. (1) the category of costs and charges which corresponds to that figure is applicable to the type of consumer composite investment, but has been calculated as zero; or
2. (2) the category of costs and charges which corresponds to that figure is not applicable to the type of consumer composite investment.

A manufacturer should consider providing the distributor of a consumer composite investment with a breakdown of the identifiable elements of ongoing costs and other contextual information or explanation of these costs to assist the distributor in enabling the retail investor to understand the nature and impact of those costs and charges.

The manufacturer must include in the product summary the transaction cost figure, expressed as a percentage of the applicable assumed investment amount.

In respect of a consumer composite investment which is subject to performance fees or carried interests, the manufacturer must provide the following information in the product summary:

1. (1) a concise explanation in plain English of how any applicable performance fees or carried interests operate;
2. (2) a summary in plain English of the applicable terms and conditions which identifies, in particular, any benchmark governing when a performance fee or carried interest will or could be applied, paid or levied, and how they are to be calculated if due; and
3. (3) at least one example illustrating how much the performance fee and/or carried interest (as applicable) could amount to if applied, paid or levied, based on a hypothetical investment of £10,000 and reasonable assumptions about the performance of the consumer composite investment.

In relation to indirect performance fees or carried interest falling within DISC 6.3.7R(2), the requirement in DISC 6.3.6R will be satisfied where the product summary includes a general explanation of the performance fees or carried interest applicable to investee consumer composite investments such as to provide the retail investor with an reasonable basis for understanding the likely impact of those costs on their investment.

The ongoing costs of any investee closed-ended investment fund need not be aggregated into the ongoing costs figure of the investor fund.  

The costs in DISC 6.4.6R still need to be disclosed in the product summary as required by DISC 6.3.1R(1)(d).

In respect of a new consumer composite investment, the estimate in DISC 6.5.2R(2) should additionally be compared against the transaction costs of consumer composite investments with a similar structure, investment strategy and underlying assets by way of checking its reasonableness. 

The product summary must be clear as to which costs and charges are estimated. 

Where relevant, the product summary must include a cross-reference to those parts of the consumer composite investment's prospectus where more detailed information on costs and charges can be found, including information on performance fees and how they are calculated.

The product summary may include any additional explanation, contextual information or breakdown of the costs and charges the manufacturer considers to be useful to the retail investor in understanding the impact of costs and charges, provided this is consistent with the information provided under DISC 6.6.1R. 

Where a consumer composite investment is a fund which invests in one or more funds managed by the same person as itself, the product summary must disclose any actual or potential benefits to that person arising from the investment in the investee funds.