A bill to rectify issues with cost disclosure rules for investment trusts has been chosen for debate in the House of Lords as the sector’s ongoing campaign begins to bear fruit.

Baroness Ros Altmann, the consumer champion and former pensions minister, submitted a private members bill to remove investment companies from the Alternative Investment Fund Managers Directive (AIFMD) regulation.

It is one of 25 bills selected from a competitive ballot held two days after the state opening on 7 November and will have its first reading on 22 November.

Following the first reading the bill will be debated and open to amendments before the members of the House of Lords vote on the bill, which is then passed to the House of Commons if it has the support of an MP.   

Altmann, who previously spoke to Citywire about the issue, said the bill is ‘quite simple’ and ‘seeks to undo a mistaken categorisation’.

According to sources, economic secretary to the Treasury Andrew Griffith has been informed of the bill and is supportive of its adoption, which would help achieve the government’s goal of unlocking pension capital to invest in UK and private markets.

AIFMD, which was introduced in 2013, is an EU law designed to protect investors in lightly regulated funds, including UK investment companies, designating them alternative investment funds (AIFs).

This has created a ‘domino effect,’ according to Bill MacLeod, managing director at Gravis, who has been heavily involved in the campaign to remove what is seen as an unfair regulatory burden on investment companies.

MacLeod explained the subsequent regulations of Mifid II and PRIIPs has meant investment companies are obliged to disclose aggregated fees they do not believe in, while rival open-ended funds do not.

Altmann said her bill will ‘undo’ the ‘original error’ and ‘address the damaging situation that has risen since then’.

‘In this specific instance, listed companies are being told to pretend that they are charging extra fees, which are already part of the market share price and are fully disclosed,’ she said. ‘This aggregation has had truly pernicious effects and the bill I hope to get through Parliament would remove the incorrect classification, to try to restore market equilibrium and stop this misleading of investors.’

Altmann will also ask an oral question to the House of Lords on 13 November calling on the government to encourage emergency intervention from the Financial Conduct Authority (FCA) to ‘halt the self-inflicted damage’ done by the regulation.

The former pensions minister is being supported by Baroness Bowles, who also submitted a private members bill this week, which asks for an amendment similar to her attempted amendment to the Financial Services and Markets Bill, which was first tabled in the summer.

Bowles’ bill has yet to be chosen in the competitive process of getting a private member bill to debate.

Baroness Bowles said the FCA had ‘admitted in meetings that the situation is misleading and are trying to fund a solution’. However, the FCA have said they are ‘stuck because of what is in the legislation and they do not have the power to change it,’ according to the House of Lords member. 

The investment company industry has been campaigning for months around the issue of cost disclosure, with most attention being given to ongoing meetings with the FCA. However, this summer, as the underlying AIFMD issue became more apparent, the industry also began discussions with HM Treasury, including sending over 40 letters in August.  

‘The demise of listed investment companies is damaging to the economy,’ said Bowles. ‘They are a unique vehicle for delivering investment into the productive part of the economy, examples being batteries or wind power, and through the structure they turn illiquid investments into liquid investment.’

The baroness added that the ‘misleading notion’ that investment companies are ‘too expensive’ has led to the ‘loss of hundreds of billions of productive investment’.