The financial sector faces a roadblock with its cost disclosure reforms, prompting industry calls for clarity from the FCA.
- Investment trust boards are challenged to balance compliance with pre-Brexit regulations against their Consumer Duty obligations.
- Retail investment platforms are voicing concerns about client protection amidst the ongoing debate on cost transparency.
- Closed-ended investments have historically grappled with transparency due to EU directives that no longer fully apply post-Brexit.
- Temporary exemptions for investment trusts highlight the difficulties faced by trusts in navigating these outdated regulations.
Investment trust boards find themselves at a crossroads, confronted with the choice of either adhering to pre-Brexit regulations or risking exclusion from new investment opportunities. This decision stems from the need to reconcile these older regulations with current Consumer Duty responsibilities, which some argue are not fully aligned.
Retail investment platforms are also entering the fray, expressing unease about client protection in the context of evolving cost transparency measures. Their participation underscores the complexity of the reforms and the differing perspectives within the industry.
Historically, closed-ended investments were subject to EU directives such as PRIIPS and MiFID II, designed to enhance cost disclosure transparency. However, these directives, applicable to non-UCITS vehicles, are now seen as less relevant in the post-Brexit regulatory landscape, complicating compliance for many firms.
In response to these challenges, the Treasury and the Financial Conduct Authority decided in September to temporarily exempt investment trusts from these EU rules. The exemption aims to mitigate issues caused by outdated methodologies, though it also highlights the pressing need for updated guidance from the FCA.
Resolving these transparency and compliance issues remains imperative for the industry, necessitating clear guidance from regulatory authorities.
