UK listed investment trusts have been granted some temporary reporting relief by regulators to unbundle fee disclosures that may have historically over-stated actual costs.
In a ruling handed down last week, the UK Financial Conduct Authority (FCA) freed up listed investment trusts to publish a break-down of fund costs in mandatory disclosure documents in addition to the all-in fee.
“This will enable funds to provide additional context where they are concerned that the aggregate figure currently required by legislation does not accurately reflect ongoing costs. This measure is not intended as a long-term solution, but is a step towards wider reform,” the FCA release says.
“Investment companies, and funds that invest in investment companies, can also consider how they reflect this additional information in their wider disclosure documents.”
The decision follows lobbying from the UK closed-ended fund sector against certain disclosure requirements of the Packaged Retail and Insurance-based Investment Products Regulation (PRIIP).
According to the FCA, the “prescriptive methodologies in the PRIIPs framework do not account for potentially relevant nuances in certain product characteristics”.
“Concerns have been raised that for listed closed-ended funds, this has resulted in the inclusion of charges that are more akin to corporate costs than investment costs.”
UK listed investment trusts have long been a popular product for some NZ financial advisers with several dual-listed on the NZX.
While the disclosure reprieve for the listed trusts is an interim measure, the UK government is working on broader financial sector reforms as part of its post-Brexit disengagement from European Union rules.
The so-called ‘Smarter regulatory framework’ will replace a swathe of EU-compliant financial laws including retail investment and insurance product regimes and the Markets in Financial Instruments Directive (MIFID) wholesale sector rules.
Last week the Financial Markets Authority (FMA) also signed an agreement with a global wholesale markets standard-setting organisation that emerged in the UK to develop a coordinated approach to rule-making in the industry.
Under the agreement with the Financial Markets Standards Board (FMSB), the NZ regulator will share information and feedback on strategic developments.
The privately owned FMSB, featuring dozens of large banks as members including the Australasian ‘big four’, was established to promote “fair and effective wholesale fixed income, currencies and commodities (FICC) markets for all participants in those markets”, the new agreement says.
“FMSB and the FMA have strong shared interests in maintaining, and where appropriate improving, the operation of wholesale FICC markets and this underpins the close strategic and working relationship…”