In extremely welcome news this morning, the government and FCA announced that they are finally addressing the issue of double counting of Investment Company costs.
The full details of the announcement can be viewed here. As you will know, Gravis, along with many others in the industry, has campaigned tirelessly for this wrong to be put right. What’s happened today is a lot less dramatic than the big bang in the 80s, but for those of us in the sector and all Investment Company investors, it is no less seismic.
Here, Gravis’s William MacLeod gives an overview of what ha been announced and what it means for investors.
“HMT and the FCA have, between them, proposed to change the reporting requirements for Investment Companies. They have applied forbearance with immediate effect and will be consulting on the new Consumer Composite Investments regime (CCI) later this year.
“Even though the forbearance is to take place with immediate effect, I suspect it will be November before this washes through. The database for costs, the EMT, is updated monthly, so to it may take a few weeks to be cleansed.
“Thereafter, we should all be focused on proposals for the new CCI regime. At the beginning of the year, roughly 330 industry participants called for the exclusion of ICs from the CCI, the replacement to PRIIPs. In doing so, we drafted an alternative method of sharing company expenses (much like any other company) but distinct from KIDs and cost disclosure.
“There will be consultation on this issue in coming months which we will all need to study carefully. The new CCI regime will, we hope, cement these temporary changes in law in 2025, so it’s imperative we get it right.
“It is momentous breakthrough that is long overdue. The campaign group – helped immensely by the support and dedication of Baronesses Bowles and Altman – has called for these changes for a number of years now and today is a day of both relief and celebration.
“Righting this wrong is profound for the UK market, the sector, and investors of all sizes.”
Baroness Bowles has also issued the following statement:
Government signals breakthrough for UK-Listed investment companies
The news today that the government and FCA have applied forbearance to bring accuracy to reporting for UK-listed investment companies is a tremendous breakthrough for the sector and investors.
After nearly two and a half years of pain (and nearly seven years for wealth managers) it is both welcome and long overdue. To put things in a money context, the amount of investment lost to the Listed Investment Company sector is now around £30bn – so we are in the order of magnitude of the £22bn that is so exercising the Chancellor – ie this has been a disaster of national scale.
Our goal throughout has been to deliver accurate and transparent reporting so that investors can make informed decisions. The changes are unlikely to happen overnight – the European MiFID Template (EMT) is generally updated monthly, so it will probably take until November to wash through assuming that the FCA forbearance is universally taken up. Thereafter, investors can be confident in the knowledge that published costs that they pay will be accurate.
The Government and FCA announcement today will achieve the outcome I am seeking with the Private Members’ Bill, and I await the legislation that the Government mentions to see how that measures up. I welcome the opportunity to engage with HM Treasury and the FCA to ensure that reporting in the future is clear and fair and ensures that it is appropriate for all investors. I welcome the opportunity to work with HM Treasury officials on the future requirements for Listed Investment Companies and investors ensuring we achieve accuracy and transparency.
The FCA consultation process for Consumer Composite Investments, which takes over from the EU PRIIPS legislation, will require all in the industry to study the proposals carefully. This could not have got to this stage had not there been a huge amount of work from many both within industry and more recently consumer-oriented bodies. Key in this was the record breaking 300 plus signatories on the response to the Government’s PRIIPs consultation and we stand by for the next stage in order to contribute to a permanent and proper resolution in 2025.
Baroness Ros Altmann added: “I am delighted with today’s news from the Treasury and FCA. Common sense prevails, although it has taken too long to reach this point.
“In the glow of this success, we must remain focussed on the future and respond constructively to the FCA’s consultation when it is announced.
“My Private Members’ Bill, which was cancelled at the General Election, would have delivered the results we are seeking namely clarity, transparency and fairness for all investors, including pension funds who have been no less confused by this ongoing muddle.”