Regulation, says the Association of Investment Companies chief executive Ian Sayers, is like a stock market: it overcorrects in both directions.
There have been periods where deregulation has gone too far, which then gives way to today’s abundance of over-regulation, which he believes must now abate.
Having been with the AIC since 1998, Sayers says one of the reasons he had a reasonable pitch for the post of director general, following Daniel Godfrey’s departure in 2009, was his background as technical director.
Tight leash
“The world has changed post the financial crisis and we have seen a level of regulatory intervention we have never seen before – and I hope we will never see again,” he says. “That probably helped my cause in getting the job because that is what we spend half our time doing.”
Post-financial crisis, European regulators have felt the need to secure a tight leash on collectives – despite funds being blameless for the crash – but it is their apparent misunderstanding of the closed-ended structure that has given the AIC most headaches.
The Alternative Investment Fund Managers Directive, for example, prompted the AIC to launch a five-year lobbying campaign before it was finally implemented in July 2013.
The first draft included potentially damaging clauses covering external management and redemption policies, says Sayers, even though neither were applicable to investment trusts.
“Whereas UCITS was about creating a European brand, the AIFMD was more a case of ‘we feel we need to regulate to protect against systemic risks’,” says Sayers.
“It has been a difficult balance, with a big wave of regulation coming down on the sector. You have to dig your heels in and occasionally bite your tongue. I do not think there is anyone who believes the AIFMD has actually helped protect investors in investment companies because an awful lot of the things it asks you to do were already in place.
“But you have got to get on and deal with it because the first draft was just awful for our sector, because the closed-ended investment trust structure is pretty unique to the UK and European regulators do not necessarily know much about the sector.”
Lately, the association has been campaigning for the removal of costly full prospectuses for secondary issues, while also calling on the EU to make investment companies a key part of its plans to deliver Capital Markets Union, and to create a more balanced funds market.
