The Financial Conduct Authority (FCA) has put in place further measures to reform unfair cost disclosure as it affects investment companies.
In a move that should end the “double counting” of the expenses of investing in UK investment companies, the FCA said the ongoing costs of closed-end investment funds (CEIF) that are deducted from their net asset value (NAV) should not be included in the composite charges figure given to consumers but disclosed separately.
In its “Simplifying Consumer Investment Disclosures” consultation paper, the FCA said: “We proposed to exclude the costs of CEIFs, which are indirect and so should be itemised separately.”
The proposals cover post-sale disclosure of costs and charges and are in line with the pre-sale proposals for consumer composite investments (CCI) which it first published in December 2024.
Richard Stone, chief executive of the Association of Investment Companies, said: “This is a win for consumers and investment companies. Consumers will have helpful cost information so then can make better investment decisions. For investment companies, these rules promise to end misleading cost disclosures. They also remove a barrier to wealth managers investing in investment companies.”
Ben Conway, head of fund management at Hawksmoor Investment Management, said: “The great news for the investment company community is the complete consistency with the CCI regimes when it comes to treatment of investment company ‘costs’. CCIs, such as open-ended funds, holding ICs should not aggregate IC costs in their ongoing charges figure, but they should disclose them separately.”
He said the “final fight” for reform was to ensure that the EMT (European Mifid Template) that funds and investment companies fill out to disseminate their key information to data providers and platforms should have another column for “ongoing operating expenses”.
The FCA consultation is open to 21 August. You can read QuotedData’s thoughts on the improving regulatory landscape for investment companies here.
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