The Financial Conduct Authority’s changes to cost disclosures could have “unintended consequences”, members of the House of Lords have warned.
Baroness Altmann and Baroness Bowles were among those that have responded with their concerns about the regulator’s proposed changes to charges for consumer composite investments.
A joint industry response to a consultation on the plans urged the FCA to exclude investment trusts from the rules.
The letter, already signed by Baronesses Altmann and Bowles, said UK-listed closed investment companies were “significantly different” from other products included in the proposed CCI framework.
It said: “We do not believe it is feasible to have a coherent and workable framework that operates across such a disparate range of investment vehicles.
“Seeking to apply the rules as proposed will create a range of unintended consequences, including further damage to the attractiveness of the LCIC market and poor consumer outcomes for investors.”
The regulator launched the consultation in December, which closes on Thursday (March 20).
It sets out there were a number of “strong and conflicting views” on what costs and charges should be disclosed for different products, including from the closed-end investment company sector.
As an interim measure, it announced it will exclude some of these companies temporarily from the Pripps regime.
However, the FCA said it was vital for consumer confidence for the companies to be included in the rules to avoid consumer harm.
This is by providing comparable and appropriate product information across similar retail investment products.
The consultation response letter said it did not consider LCIC’s exclusion from other regimes as sufficient.
It said: “We have seen hugely damaging impacts from well-meaning regulations purporting to protect consumers, but which ultimately mislead and damage investor interests. These companies are already significantly regulated.
“The proposed new regime fails to recognise the unique characteristics and benefits of the sector for long term investors.”
When the consultation was launched Simon Walls, interim executive director of markets at the FCA, said: “High quality product information will give consumers the confidence to invest; increased participation in this market will not only benefit consumers but will also provide capital to drive the economy and boost growth.
“The proposals set out the FCA’s ambition of building a new, bolder regime, and it is open-minded about how it can be designed.”
tara.o’connor@ft.com
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