Wealth manager trade body PIMFA has warned that the FCA’s intention to improve consumer outcomes and promote transparency on Consumer Composite Investments (CCIs) could do the opposite.

PIMFA said the proposed regime, “runs the risk of creating more confusion for industry and consumers, not less.”

The FCA announced its plans to consult on new rules covering firms that make or distribute CCIs to retail investors in the UK earlier this year, in a move that could affect up to 12.6m UK investors.

The new regime would cover funds, structured products, insurance-based investment products, contracts for difference and investments such as derivatives.

The FCA said its aim was to make the regulatory regime covering these investments “simpler and flexible” to boost investment. Stakeholders had until 28 May to respond to the proposals.

In its response PIMFA warned of a disconnect between the FCA’s vision of a flexible, simplified disclosure regime and the reality presented in the consultation.

PIMFA said: “Firms report that the framework appears rigid, overly prescriptive, and difficult to interpret. Much of this confusion appears to stem from unclear distinctions between requirements, expectations, and guidance.”

It warned that many firms are uncertain whether they are misinterpreting the proposals or whether the FCA may be underestimating the operational challenges involved in implementation.

The trade body said it supports the proposed removal of implicit transaction cost disclosure, which has long been a source of confusion. It added that members had suggested that transaction costs would be better understood as part of overall performance rather than as part of the explicit product costs and charges, which may be misleading to consumers.

PIMFA called for a single, clearly-defined implementation date rather than dual-running regimes during a transitional stage. It would provide greater certainty and allow firms to manage internal planning and client communications more effectively, the trade body said.

Julia Sage-Bell, senior policy adviser at PIMFA, said: “PIMFA shares the FCA’s aim of delivering better consumer outcomes and increasing transparency.  However, as currently conceived, the CCI proposals will not result in the simplicity and clarity the industry had hoped for.

“As it continues to refine the final regime, the FCA needs to ensure that its expression of what the regime represents and the practical implications which fall on industry to deliver it are aligned. This means prioritising the disclosure of information which is accurate, understandable and comparable across the full spectrum of client facing disclosures.”

She added: “We remain concerned that this disconnect between the two has not been sufficiently addressed and as a result, we run the risk of creating more confusion for industry and consumers, not less.”