The Financial Conduct Authority (FCA) has introduced temporary measures to allow investment companies to enhance the clarity of their cost disclosures, aiding
consumers in making well-informed investment decisions. In response to concerns that current disclosure obligations result in ambiguous cost information, the FCA now permits funds to provide a factual breakdown of their costs.
The
introduced measures enable funds to provide additional context, particularly
when the current legislative requirement for an aggregate figure may not
accurately represent ongoing costs. The FCA has clarified that these measures
are not a long-term solution.
Investment
companies and funds investing in them are encouraged to consider incorporating
this additional information into their broader disclosure documents. Firms are
additionally expected to evaluate their obligations under the Consumer Duty. These
changes align with the FCA’s objectives under the Consumer Duty, ensuring
consumers receive timely and comprehensible information.
The
FCA is pursuing changes to the cost-disclosure regime, contingent on
legislative adjustments, including the revocation of the PRIIPs Regulation.
Following the Treasury’s commitment to repealing relevant MiFID cost and
charges provisions, the FCA anticipates designing a cost disclosure framework.
The agency looks forward to implementing a retail disclosure regime in the
future.
In
response to the FCA’s announcement regarding measures for investment company
cost disclosure, a spokesperson from the Investment Association stated:
“We welcome the FCA’s statement on costs and charges relating to listed
closed-ended funds.” The current cost disclosure requirements for listed
closed-ended funds have had the unintended consequence of creating confusion
over fees, leading to adverse impacts on investment decisions.”
“Given
current legal constraints, the FCA’s statement is a very focused measure, but
one that reflects the wider importance of clearer disclosures in helping
investors make informed choices on where to invest their money. In the near
term, it will increase transparency, and we eagerly anticipate a broader
discussion into next year on the future shape of the UK retail disclosure
regime.”
FCA’s
Proposals: Capital Reserves for Consumer Compensation
In
an earlier report by Finance
Magnates, it was highlighted that the
FCA introduced proposals mandating personal investment firms to maintain
sufficient capital reserves for compensating consumers affected by inadequate
financial advice. The initiative adopts a “polluter pays” principle,
holding firms accountable for the financial consequences of harmful advice.
Under
the proposals, investment advisors must assess potential redress liabilities,
ensuring adequate capital for compensation. Firms falling short will face
automatic asset retention rules. This measure responds to the Financial
Services Compensation Scheme disbursing £760 million from 2016 to 2022 for
substandard advice, primarily from 75 firms.
Sarah
Pritchard, the Executive Director of Markets and International at the FCA, emphasized
the need for a resilient financial advice market to alleviate the unfair burden
on diligent advisors. The FCA seeks industry and consumer group feedback,
planning extensive outreach during the 16-week consultation. About
500 sole traders and prudentially supervised groups are exempt. The proposals
align with the FCA’s consumer investments strategy and three-year strategy
focused on reducing harm and setting higher standards.
In
regulatory updates, the FCA addresses dormant licenses, influencing over 1,100
business lines. The Q3 report highlights reviews of 5,300 financial promotions,
aligning with stricter rules for crypto assets. The FCA has updated guidance for
crypto asset firms, providing a transition period for compliance with marketing
regulations.
The Financial Conduct Authority (FCA) has introduced temporary measures to allow investment companies to enhance the clarity of their cost disclosures, aiding
consumers in making well-informed investment decisions. In response to concerns that current disclosure obligations result in ambiguous cost information, the FCA now permits funds to provide a factual breakdown of their costs.
The
introduced measures enable funds to provide additional context, particularly
when the current legislative requirement for an aggregate figure may not
accurately represent ongoing costs. The FCA has clarified that these measures
are not a long-term solution.
Investment
companies and funds investing in them are encouraged to consider incorporating
this additional information into their broader disclosure documents. Firms are
additionally expected to evaluate their obligations under the Consumer Duty. These
changes align with the FCA’s objectives under the Consumer Duty, ensuring
consumers receive timely and comprehensible information.
The
FCA is pursuing changes to the cost-disclosure regime, contingent on
legislative adjustments, including the revocation of the PRIIPs Regulation.
Following the Treasury’s commitment to repealing relevant MiFID cost and
charges provisions, the FCA anticipates designing a cost disclosure framework.
The agency looks forward to implementing a retail disclosure regime in the
future.
In
response to the FCA’s announcement regarding measures for investment company
cost disclosure, a spokesperson from the Investment Association stated:
“We welcome the FCA’s statement on costs and charges relating to listed
closed-ended funds.” The current cost disclosure requirements for listed
closed-ended funds have had the unintended consequence of creating confusion
over fees, leading to adverse impacts on investment decisions.”
“Given
current legal constraints, the FCA’s statement is a very focused measure, but
one that reflects the wider importance of clearer disclosures in helping
investors make informed choices on where to invest their money. In the near
term, it will increase transparency, and we eagerly anticipate a broader
discussion into next year on the future shape of the UK retail disclosure
regime.”
FCA’s
Proposals: Capital Reserves for Consumer Compensation
In
an earlier report by Finance
Magnates, it was highlighted that the
FCA introduced proposals mandating personal investment firms to maintain
sufficient capital reserves for compensating consumers affected by inadequate
financial advice. The initiative adopts a “polluter pays” principle,
holding firms accountable for the financial consequences of harmful advice.
Under
the proposals, investment advisors must assess potential redress liabilities,
ensuring adequate capital for compensation. Firms falling short will face
automatic asset retention rules. This measure responds to the Financial
Services Compensation Scheme disbursing £760 million from 2016 to 2022 for
substandard advice, primarily from 75 firms.
Sarah
Pritchard, the Executive Director of Markets and International at the FCA, emphasized
the need for a resilient financial advice market to alleviate the unfair burden
on diligent advisors. The FCA seeks industry and consumer group feedback,
planning extensive outreach during the 16-week consultation. About
500 sole traders and prudentially supervised groups are exempt. The proposals
align with the FCA’s consumer investments strategy and three-year strategy
focused on reducing harm and setting higher standards.
In
regulatory updates, the FCA addresses dormant licenses, influencing over 1,100
business lines. The Q3 report highlights reviews of 5,300 financial promotions,
aligning with stricter rules for crypto assets. The FCA has updated guidance for
crypto asset firms, providing a transition period for compliance with marketing
regulations.
