The House of Lords Financial Services Regulation Committee has criticised the FCA’s application of retained EU regulation requiring investment trusts to report their costs in the same format as open-ended funds.
In a letter addressed to chief executive Nikhil Rathi, the committee said current disclosure requirements fail to recognise the role of listed company shares as the value of the financial instrument invested in, and indeed the mechanism creating investment permanence.
The committee claimed that retained Mifid (Markets in Financial Instruments Directive) and Priips (Packaged Retail Investment and Insurance-based Products) rules had led to a significant decrease in money invested in trusts, estimated at around £7bn that could be allocated to the UK economy.
See also: Gravis MD Bill MacLeod: Beneath the trust industry’s campaign for fairer cost disclosure
They also said the rules had led to the acquisition of UK real assets by foreign investors at significantly reduced prices.
Baroness Bowles (pictured), member of the House of Lords Financial Services Regulation Committee, said: “Since the first one was founded in 1868, investment trusts have become a British success story. They have given institutions and individuals an opportunity to invest in infrastructure, growth companies and renewable energy.
“This success is under threat by the FCA’s interpretation of EU-retained Mifid and Priips, which is not shared by any other country, and has created an unlevel playing field on an international level.
“Urgent steps are necessary to resolve the problems that have been created. The FCA’s forbearance statement, which was issued in November 2023, helped, but does not go far enough.
“A potential solution could lie in requiring Authorised Corporate Directors to enter zero into the appropriate column that is for ongoing fund charges, aligning with the practices of EU funds, rather than inputting figures that result in misleading disclosures.
“It is ludicrous that directors and companies are being forced to make misleading statements to investors.”
See also: Could one spreadsheet column solve the cost disclosure crisis for trusts?
