AIC: exclude investment companies from the CCI regime
Investment companies should be taken out of the regime or ringfenced.
The Association of Investment Companies (AIC) has responded to the FCA’s consultation on a new retail disclosure framework, ‘A new product information framework for Consumer Composite Investments’ (CP24/30).
The AIC has reiterated its call for investment companies to be excluded from the Consumer Composite Investments (CCI) regime, or if this is not done, they should be ringfenced within the regime and no additional obligations or disclosures imposed.
Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “Investment companies should be excluded from the new retail disclosure regime. The new rules would be an unjustified burden on our sector, and place investment companies at a competitive disadvantage. It is not too late for the government to legislate to exclude the sector or for the FCA to create a ringfence so that no additional obligations are imposed on investment companies.”
The main points covered in the AIC’s consultation response are summarised below.
1. Further regulation of investment companies is unnecessary
Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “Existing disclosure requirements for investment companies are already stringent, including the UK Listing Rules and accountancy rules. We must take the opportunity to overhaul failing EU-derived regulation and create a better disclosure regime for investors. This would return the sector to the position before 2018 where investors were given all the information they needed to make informed decisions and investment companies were able to compete fairly on their merits against both trading companies and funds.”
2. The regime’s approach to cost disclosure would embed current market distortions
Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “Far from helping consumers, the FCA’s proposals would perpetuate many of the flaws in current disclosures. For example, keeping the requirement to bundle up costs of different kinds results in a misleading single-figure cost disclosure. This makes it difficult to compare costs, reduces transparency and makes it harder for an investor to understand whether they are getting value for money.”
“Investment companies should be excluded from the new retail disclosure regime. The new rules would be an unjustified burden on our sector, and place investment companies at a competitive disadvantage.”
Richard Stone, Chief Executive of the Association of Investment Companies (AIC)
3. Different treatment of passive and active funds is unfair and inconsistent
Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “The flaws in the FCA’s proposals are exemplified by its suggestion that passive funds be exempt from the requirement to pull through any expenses incurred by collective investments that they hold, while actively managed products will have to do so. This is blatantly unfair and inconsistent.
“The FCA is absolutely right in identifying the reasons why costs should not be pulled through by passive funds, but the same logic holds true for active funds. Active asset managers are incentivised to maximise their own performance and therefore select investments, including investment companies or other funds, which represent value for money. The active asset manager’s interests are already aligned with their investors. Investors need to see the active asset manager’s fees on their own, without aggregation, to ensure they are getting value for money.”
4. A different implementation deadline for investment companies is unjustified
Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “The FCA proposes to introduce these new rules for investment companies six months before other funds. This is an impractical suggestion that will harm the sector and cause market disruption.”
5. The regulation would have a deeply detrimental impact
Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “The current proposals risk embedding the disadvantages currently faced by investment companies which have seen many wealth managers reducing their holdings in the sector and have contributed to extended discounts. Investment companies have a vital role to play in supporting UK growth and capital markets, delivering better long-term returns for investors. If the FCA persists with the current proposals, it risks creating a market with less choice and worse outcomes. We urge the regulator to rethink these proposals as set out in our consultation response.”
6. The industry is speaking with one voice
Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “The wider industry, including AIC members, management groups and investors, is also responding to the FCA consultation. Many are supporting the AIC’s recommendations, as is the Joint Industry Consultation Response. We welcome and support these contributions to the debate. They demonstrate that the industry has a strong and united view of the need for a fundamentally different approach, ideally excluding the sector from the CCI regime or ringfencing it within the regime if it remains within the defined scope.”
You can read the AIC’s full consultation response here.
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Notes to editors
- The Association of Investment Companies (AIC) represents a broad range of investment trusts and VCTs, collectively known as investment companies. The AIC’s vision is for closed-ended investment companies to be understood and considered by every investor. The AIC has 308 members and the industry has total assets of approximately £274 billion.
- For more information about the AIC and investment trusts, visit the AIC’s website.
- Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance. The value of investment company shares, and the income from them, can fall as well as rise. You may not get back the full amount invested and, in some cases, nothing at all.
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