The news UK-listed investment company investors and cost disclosure campaigners have long been waiting for arrived at the start of October in the form of a draft Statutory Instrument (SI) proposed by HM Treasury which you can view here.
The SI goes further than any thought possible and we are thrilled.
Key wording to highlight from the SI:
- ‘It is broadly accepted by industry and the government that the single aggregated figure that is being produced under current EU-inherited rules is not an accurate representation of the actual cost of investment in shares in an investment trust.’
- ‘Investment trusts, along with persons advising on or selling shares of investment trusts, will not be required to produce the Key Information Document (a standardised information document prepared for products in scope of the PRIIPs Regulation). Additionally, investment trusts, and firms investing in them, will not be required to disclose costs and charges relating to investment trusts to clients, pursuant to the MiFID Org Regulation.’
What does this mean?
This means that not only do investment companies no longer need to publish a KID or publish an ongoing cost, but also that distributors such as Wealth Managers, Discretionary Fund Managers and Platforms may not publish an ongoing cost.
Furthermore, open ended funds do not need to aggregate the costs of investment companies – because they won’t exist.
As you will know, the KIIDs for the VT Gravis fund OEICs were updated some weeks ago, but the electronic data feeds (known as the EMTs) were still showing the incorrect synthetic costs. Following the news of the SI this discrepancy has now been eliminated and the EMTs have now been updated. The inaccurate reporting of costs is no longer required and the OCFs of the VT Gravis Funds are now returning to honest reporting of the costs of ownership, rather than the synthetic figure in use for the last 30 months.
A summary for each of the VT Gravis fund OEICs can be seen below.
VT Gravis UK Infrastructure Income Fund
VT Gravis Clean Energy Income Fund
VT Gravis UK Listed Property Fund
VT Gravis Digital Infrastructure Income Fund
Please note the FCA provided immediate forbearance from 19th September (link here) and clarification for the benefit of distributors on 30th September. If you would like the EMT files for the VT Gravis Funds to use or send to your software providers, please let us know and we will be happy to share them.
What happens next?
The SI will have to progress through draft stage and be passed by both the House of Lords and the House of Commons. Once that process starts it cannot be amended and, since the mid-1940s, only 3 SIs have failed to progress, so the chances of success are thought to be very high.
There is a light legislative programme, so it is likely to be swift once the draft phase has concluded.
Investment companies will be kept within the legislative boundary of the incoming Consumer Composite Investments regime, and it is therefore likely that all market participants will watch carefully as that develops.
For now, we celebrate the fact the inappropriate and misleading publication of costs is no longer required, and investors can make informed decisions based on accurate information.
Gravis has been at the heart of the campaign to get accurate cost disclosure for UK listed investment companies and we would like to take this opportunity to thank you for your support with the campaign and achieving the desired result.