The House of Lords debated Baroness Altmann’s bill to remove investment companies from the Alternative Investment Funds Directive (AIFMD) on Friday (1 March), while speakers added criticism of the FCA’s handling of regulation around investment trusts.
Baroness Bowles called the FCA’s interpretation “illegal, irrational and inconsistent” and said the FCA had been “presiding over a market failure caused by knowingly tricking the consumer”.
See also: Calls for judicial review into FCA as investment trust sector faces extinction
Leading individuals in the industry have been campaigning for fairer cost disclosure regulation for investment trusts over the past few years. Under the alternative investment fund manager’s directive [AIFMD], investment companies are required to disclose costs in the same way that unit trusts are. However, investment companies are traded on the stock exchange so investors therefore buy them at price. This means investment trusts are effectively double counting their costs.
Baroness Altmann put forward a Private Member’s Bill to the House of Lords on 9 November to alter the way investment trusts are regulated by removing them from AIFMD. In the Autumn Statement on 22 November 2022, it was confirmed the FCA was given permission to overhaul issues of cost disclosure regulation unfairly affecting investment companies. The FCA set a deadline of 10 January to receive submissions on the issue.
In Friday’s debate, Altmann received support from Lord MacPherson, Lord Hannan, and Lord Livermore among others.
“The Bill seeks to remedy legislative errors that have contributed to a haemorrhaging of funds away from UK-listed investment companies,” Altmann said.
“Flawed interpretation of EU regulations, which no EU country has applied as we have, has stoked massive selling pressure, with pension funds, wealth managers and retail investors having to abandon listed investment companies here.”
The FCA has been approached for comment.
