Article 24 of Mifid II requires firms to show all costs, explicit and implicit, in percentages as well as pounds and pence.
But the FCA has not considered enforcement action against any firm for transparency breaches under Mifid II, according to a Freedom of Information request filed by Miller’s wealth management firm SCM Direct.
The FCA has received six self-reports of non-compliance and has written to eight firms about cost disclosure requirements, the FOI stated. However, more than 50 firms are in breach of the cost disclosure requirements, according to an SCM Direct dossier published in April.
Enforcing Mifid II transparency requirements would save consumers £903m annually through improved competition, she argued.
FCA boss an ‘industry lapdog’
Miller (pictured) called on FCA chief executive Andrew Bailey to start enforcing the industry rather than acting as its lapdog.
“The message this failure is sending to the market is that the FCA does not consider breach of such laws to be important,” says Miller.
“In addition, the FCA has a statutory objective to promote effective competition in the interest of consumers. But if consumers don’t know what they are paying for their investments, competition can never be effective.”
Regulator defends its lack of enforcement
But the FCA argued enforcement is not the only regulatory tool at its disposal.
“We decide whether to take enforcement action based on whether we believe there has been serious misconduct, considering factors such as intent to do wrong, failure to act on feedback or negligence or recklessness,” the regulator said in statement responding to Miller’s accusations.
The FCA would take a proportionate rather than strict liability approach to Mifid II breaches because the directive only came into effect on 3 January and due to the magnitude and complexity of the changes.
The statement said: “This means we have no intention of taking enforcement action against firms for not meeting all the requirements straight away where there is evidence they have taken sufficient steps to meet the new obligations by 3 January 2018 – rather the FCA will work with such firms to enable them to meet the requirements. However, where firms have made no real or genuine attempt to be ready, or where key obligations are deliberately flouted, the FCA will take a much stricter approach.”
Litigation funds eye Mifid II breaches
At least one litigation fund is examining the merits of group action over UK firms failing to properly disclose costs at charges.
Under the litigation, individual and institutional investors would seek via the High Court to recoup losses suffered due to the failure of firms to disclose full costs and fees.
ICO urged FCA to comply with FOI
SCM Direct made the request for information from the regulator on 19 May.
When the FCA failed to respond within 20 working days, Miller filed a complaint with the Information Commissioner’s Office. In August, it instructed the FCA to comply with Miller’s request within 10 days.
The regulator had previously said it was assessing whether releasing the information was in the public interest.