How the FCA’s Consumer Duty Regime Impacts the EMT

The Consumer Duty is a new set of rules developed by the FCA (Financial Conduct Authority) to create a higher standard of consumer protection across financial services. While there is no one-size-fits-all approach to compliance, it does require firms to deliver good outcomes for their clients, i.e., putting their needs first and treating them fairly.

The rules and guidance for the Consumer Duty were introduced on a phased basis, with new and existing products or services that are open to sale or renewal coming into force on 31 July 2023, and closed products or services coming into force on 31 July 2024

In this blog post, we delve into the EMT, its background and purpose, and how Consumer Duty will impact the way the template is completed by firms.

FinDatEx and the need for standardization

FinDatEx is an organisation formed by representatives from the European Financial Services sector. They came together with a common goal: to standardise the exchange of financial data in line with various European Financial markets legislation such as MiFID II and PRIIPs.

Over time, it became clear that financial products and services were becoming increasingly more complex and diverse. As a result, there was a growing market demand for streamlined and accurate data exchange between asset managers, distributors and end investors.

Prior to FinDatEx, the lack of common templates and standards led to inconsistencies in data reporting and analysis along with difficulties in the exchange of such data between the relevant stakeholders.

How has this been resolved?

To address these challenges, FinDatEx develops and maintains templates (which can be used free of charge) specifically designed for the data reporting of structured products and funds. These templates enable efficient and accurate data exchange among market participants.

By promoting harmonisation, enhancing data quality, and improving transparency, FinDatEx supports investors in the European market in making informed investment decisions and other stakeholders to satisfy their regulatory and compliance requirements.

What is the European MiFID Template (“EMT”)

The EMT is one of the templates maintained by FinDatEx and is a product of the MiFID II Regulation which came into force on 02 January 2018.

The Regulation itself had two key areas of focus. Firstly, to enhance costs transparency to investors and secondly to ensure the right product “falls” into the hands of the right investor (enhanced target market definitions). Product Manufacturers now can clearly and accurately transmit information to distributors about their products and the distributors can apply the MiFID II requirements to their sales process.

The History of the EMT

The EMT was first introduced back in January 2018. With a focus on enhancing cost transparency solely for investors in structured products providing them with the information they need to make more informed investment decisions.

Since then, there have been significant updates. In December 2019, EMT V3 was published, expanding its scope to cover both structured products and funds through the introduction of fund specific EMT fields. This change required product manufacturers to provide more focused information to distributors, ensuring compliance with MiFID II requirements during the sales process. EMT V3.1 was launched a few months later, incorporating fields specifically designed for environmental, social, and governance (ESG) factors. This update was driven by the market demand for implementing MiFID II ESG/SFDR principles.

Where are we now?

In March 2022, FinDatEx introduced EMT V4, which included updates in response to the launch of the European ESG template (EET) and replaced the previous versions of the template. With Brexit, and divergence of the FCA in various aspects as against Europe in April 2023, EMT V4.1 was released which brings us to the latest update for Manufacturers of investment products distributed within the UK market.

What does EMT V4.1 require specifically for the UK?

EMT V4.1 introduces ten new fields that are tailored to UK specific market requirements. These additions align with the upcoming FCA’s Consumer Duty regime and reporting requirements, which will be effective as of 31 July 2023.The new fields that have been introduced allow for additional reporting on price and value outcomes expected as a result of the UK Consumer Duty.

These ten additional fields are as follows:

• 09010 – Financial Instrument Transaction Costs Ex Ante UK
• 09020 – Financial Instrument Transaction Costs Ex Post UK
• 09030 – EMT Data Reporting VFM UK
• 09040 – Is Assessment Of Value Required Under COLL UK
• 09050 – Outcome Of COLL Assessment Of Value UK
• 09060 – Outcome Of PRIN Value Assessment Or Review UK
• 09070 – Other Review Related To Value And Or Charges UK
• 09080 – Further Information UK
• 09090 – Review Date UK
• 09100 – Review Next Due UK

Fields 09010 and 09020 capture specific details related to transaction costs, providing both ex-ante (anticipated) and ex-post (actual) calculations based on the UK methodology. Meanwhile, fields 09030 to 09100 enable the reporting of UK-specific value-for-money considerations. These fields will provide investors with an idea of whether the product or service it relates to offers them fair value in accordance with their individual consumer preferences.

Which Manufacturers should complete the additional fields?

Noting that the conditionality for completion of these fields is triggered if field 09030 is set to “Y.” – yes This field indicates whether UK value-for-money data is being reported in the EMT.

When should these additional fields in EMT V4.1 be completed?

Given that the UK Consumer Duty comes into force on 31 July 2023, Manufacturers who fall into scope for reporting value for money data, should have their EMT produced and distributed by this date.

Can EMT V4  still be used for non-UK manufactured products?

Absolutely, V4 and V4.1 are set to run in parallel. Manufacturers should note that non-UK manufactured products can still use EMT V4. This approach sets to provide flexibility for those operating outside of the UK market.

How Zeidler Group can help your firm

Zeidler offer an innovative, all-in-one solution for the seamless production, validation, and dissemination of EMT V4 and V4.1. Our experienced Reporting Services Division can provide support, knowledge and understanding of the different aspects of EMT V4 and V4.1 so that your EMT is completed to the highest standard and in line with the various template and compliance requirements. This will ensure ingestion of fund data by various data vendors and other end recipients.