MPs and peers have teamed up with a range of asset managers, law firms and investment banks to submit a response to the UK government consultation on the future of investment trust regulation.
In a recent budget, chancellor Jeremy Hunt announced his intention to replace the Priips (Packaged Retail Investment and Insurance) product regulations with a new regime.
These new rules, he said, would take into account the previous concerns of the industry around how investment trust cost disclosures have to be reported.
FT Adviser previously disclosed that Baroness Sharon Bowles, a former MEP, raised the issue of cost disclosures that could make the charges on investment trusts seem higher than they are.
This is because the trusts are treated as if they are open-ended funds, rather than listed equities.
Bowles said the rules as proposed previously risked “decimating” the investment trust industry, and, in particular the renewable energy investment trust sector.
The latest plan from the Treasury is to replace the existing regulations with a regulatory framework for Consumer Composite Investments (CCIs), which treat open-ended funds and investment trusts the same way.
The plans were open for consultation until midnight yesterday (January 10).
Now 24 parliamentarians and a range of asset management firms have come together to contribute a response to the consultation.
Baroness Bowles is one of the 24 parliamentarians to have signed this, among the others are John Baron MP, and former pensions minister Ros Altman.
Higher charges
Speaking to FT Adviser, Baroness Altmann said: "This is a spectacular own goal by the UK. I'm amazed the FCA is relaxed about this. This should be an emergency situation, investors are not able to make informed decisions, which undermines the aim of the consumer duty.
"The appearance of higher charges is leading to investors selling investment trusts. The appearance of higher charges is misleading investors."
An example of the rules impacting in, what Altmann views as, a negative way for investors is that, by classifying investment trusts in the same way as open-ended funds, the charges appear higher to own the same asset.
For instance, a renewable energy investment trust, which is a listed company owning renewable energy assets such as a wind farm, has to disclose charges such as audit fees, which are not paid by the investor directly, as if they are paid by the investor directly.
Yet a conventional equity company, such as a listed energy supplier, does not need to report such charges as part of the cost of ownership for an investor, despite the costs also being paid.
Altmann said: "This is leading to a situation where people are selling investment trusts or not buying them. Its undermining competition and the UK is the only country in the world that treats investment companies this way."
The response, seen by FT Adviser, states the requirement in the proposed new rules for “repayment” of an investment leaves open the risk that clients could misunderstand the nature of investment trusts.
