Change in capital requirements for brokers could bring down cost of trading investment companies
The AIC warmly welcomes the Prudential Regulatory Authority’s (PRA’s) policy statement on the amount of capital brokers have to hold to make markets in investment company shares.
- See PRA policy statement ‘PS17/23 – Implementation of the Basel 3.1 standards near-final part 1’
The Association of Investment Companies (AIC) warmly welcomes the Prudential Regulatory Authority’s (PRA’s) policy statement which explains that the amount of capital brokers have to hold to make markets in investment company shares will be the same as for shares in other companies (trading companies) under new rules to be introduced for banks.
Currently brokers could be required to hold double the amount of capital to make markets in investment company shares compared to trading company shares. Positions in investment companies are potentially subject to a capital requirement of 32%, versus 16% for trading companies.
The PRA has announced that in its new rules investment company shares will have the same capital requirements as other company shares.
“We warmly welcome the news that brokers making markets in investment companies’ shares will be subject to the same capital requirements as other listed shares. We have lobbied for this change as the current rules unfairly treat investment company shares as high-risk collective investment undertakings. The change of rules could lead to more brokers making markets in investment company shares and an increase in liquidity, bringing down the cost of trading for investors.”
Richard Stone, Chief Executive of the Association of Investment Companies (AIC)
Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “We warmly welcome the news that brokers making markets in investment companies’ shares will be subject to the same capital requirements as other listed shares. We have lobbied for this change as the current rules unfairly treat investment company shares as high-risk collective investment undertakings. The change of rules could lead to more brokers making markets in investment company shares and an increase in liquidity, bringing down the cost of trading for investors.”
The PRA’s announcement follows the FCA’s confirmation that regulated firms can treat investment company shares like other listed equities when determining their risk capital requirements.
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Notes to editors
- The Association of Investment Companies (AIC) represents a broad range of closed-ended investment companies, incorporating investment trusts and other closed-ended investment companies and VCTs. The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s vision is for closed-ended investment companies to be considered by every investor. The AIC has 341 members and the industry has total assets of approximately £260 billion.
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