Today’s Autumn Statement made an important reference to the UK Retail Disclosure Framework and legislative issues with cost disclosure that have been plaguing the Investment Companies sector. Wealth DFM reported on these issues in a recent blog from Gravis’ William Macleod
5.117 of the Autumn Statement outlined the Government’s commitment to replace PRIIPs regulation with a new framework tailored to the UK and fully resolve legislative issues with cost disclosure.
Alongside the Autumn Statement was a Policy Note on the UK Retail Disclosure Framework, which announced the Government’s intention to repeal relevant provisions of MiFID alongside its replacement of PRIIPs which will require two Statutory Instruments. Sections 4.19-4.22 of this Policy Note acknowledged that the Investment Companies sector is highly aligned with the government’s priority to promote long term, productive investment and that it is a key source of capital and liquidity to support economic growth.
It went on to say that: “the reforms will enable the FCA to reform cost disclosure in a holistic way; ensuring it is accurate, does not impact the competitiveness of firms and is not misleading to retail investors.” In the meantime, the Policy Note revealed that the “FCA is also considering interim solutions to mitigate the impacts on the investment company sector in the short term, as the government acts to implement a long-term legislative solution to the issue.”
Responding to the Autumn Statement and before presenting her Private Members Bill, Baroness Altmann, commented: “Of course, the Government’s recognition that the investment trust charges disclosure regime needs reform is welcome. However, it is disappointing that there seems little sign of the required sense of urgency. The SI wants to ensure retail investors are given the right information to enable properly informed investment decisions, but the present situation is so misleading and damaging that it should be addressed immediately. There is also huge emphasis on new funds being set up such as by the PPF and investment banks using the previously proposed LIFTS and LTAF structures, but there are ready made specialist vehicles which could help pension funds back such long term illiquid assets straight away and they currently trade at significant discounts to asset value offering potentially attractive long term value to pension holders. This SI would remove the huge self-inflicted damage of misleading charges disclosure which has driven so many investors away and the sooner this happens the better. It is not yet clear whether this SI will apply to underlying individual funds or not. I welcome this initiative and look forward to reviewing the proposed wording and scope at the earliest opportunity. This situation really deserves rapid intervention.”
Commenting on the Autumn Statement, William MacLeod, managing director at Gravis, said: “The reference to these Statutory Instruments is both welcome and hugely significant. It reiterates the Government’s position, but it cannot afford to delay the matter further. The Private Members Bill presented by Baroness Altmann which has its 1st Reading in the House of Lords today goes further and covers AIFMD as well as MiFID and PRIIPs and could in theory be adopted to accelerate matters, restoring order to the market and bring the current confusion to an end. The addition of repealing AIFMD legislation, inaccurately applied to Investment Companies, has been very costly and a significant impediment to market efficiency, requiring brokers to hold ever increasing levels of regulatory capital in order to trade in these companies, managers to pay AIF fees amounting to c. £200m-£400m over the last ten years and has doubled up the regulatory oversight, but has offered no additional investor protection.”
