To ask His Majesty’s Government what steps they are considering to ensure that investors in UK-listed closed-ended investment companies are not disadvantaged relative to investors in open-ended funds as a result of cost disclosure requirements and investment platforms refusing to allow transactions related to them.
My Lords, last year, the Government legislated to reform retail disclosure so that it is fairer and more proportionate. Recognising the concerns mentioned in the Question, the Government also took exceptional action to exempt investment companies from cost disclosure requirements to provide interim relief while the replacement regime is finalised. Operationalising this legislation is now a matter for industry and the regulator.
My Lords, I thank the Minister for that response, but despite the Government’s welcome SI, and FCA emergency guidance last November, some retail platforms continue to ban customers from investing in UK investment trusts that do not disclose their ongoing charging figures, even though those figures are misleading, as the Government accept. Will the Minister hold urgent talks with the FCA to insist that this barrier to investment be removed immediately?
I am very grateful to the noble Baroness for the question. I also pay tribute to other noble Lords, including the noble Baronesses, Lady Altmann and Lady Bowles, for their continued championing of the investment trust sector and for bringing their concerns to the Government’s attention in their Private Members’ Bills in this Parliament and the previous one. As a result of their campaigning, the Government have now legislated to provide the Financial Conduct Authority with tailored powers to deliver a new disclosure regime. The Government have also temporarily exempted investment companies from cost disclosure legislation.
On the specific matter raised by the Question, of requirements by investment platforms for the investments they offer, that is now a matter for the industry and the regulator. While I recognise that the Government may not have gone as far as the noble Baroness would like, we have a shared objective of ensuring that that this reform achieves the right outcomes for investment companies and for the sector as a whole.
My Lords, I declare my interest as a director of the London Stock Exchange. As the Minister said, in November, the PRIIPS SI made an immediate policy and legislative change in view of responses to HMT’s CCI consultation, aiming to free the investment trust market from incorrect legislation. Did the Government expect the FCA to reverse that in their December consultation? Will the Government reassert their policy? Will they also assert their policies against duplicative legislation and in favour of growth for consumer investments? If not, how do the Government expect to harness either retail or professional investment in this valuable sector for infrastructure?
I am grateful to the noble Baroness for her question. I absolutely recognise the key role that the investment company sector plays in the UK’s economy, as she sets out, representing more than 30% of the FTSE 250 and investing in assets that support the Government’s growth agenda. We have listened to industry concerns and, last year, as the noble Baroness said, we legislated to reform retail disclosure. The FCA launched a consultation on an entire replacement regime in December. The Government look forward to seeing the outcomes of that consultation in due course.
My Lords, what is going wrong when Parliament—and all credit to the Government for acting on this matter—and the Government pass a statutory instrument and the regulator then puts out a consultation document that provides for reversing what the Government have said should happen and what Parliament has decided? I know that the Minister must be aware of the number of Peers and others who have written on this matter. Surely the regulator is accountable to Parliament and the Government and should behave accordingly.
I absolutely recognise the issues that the noble Lord raises. The Government’s view is that now that they have temporarily removed investment trusts from cost disclosure requirements, implementation is a matter for the industry. I recognise that there are some frustrations among the sector, but we believe that operationalising this legislation is a matter for the industry and the regulator.
My Lords, I declare my interests as an investor in investment trusts and as a senior partner at Cavendish, which has written in to the consultations. It is quite clear that investment trusts offer members of the public the opportunity to invest in assets that would not otherwise be available to them and should be encouraged. The problem is that the rules were set in Brussels, and Europe does not have investment trusts. We now have the opportunity to do something bespoke and specific for us. Does the Minister agree that that will not be possible with the current structure that we have with the FCA and that it is now time that the FCA and, for that matter, FOS, were brought within government so that the situation as my noble friend Lord Forsyth explained it can be resolved?
I do not think I can agree with the second part of the noble Lord’s question, but I absolutely agree that these vehicles do not exist in Europe and do exist in this country, which is exactly why the Government legislated to reform retail disclosure in the way that they did so that it is fairer, more proportionate and more suited for UK markets.
My Lords, does the Minister agree that the system needs to be transparent and, quite frankly, there need to be effective rules? If we have effective legislation or rules, and we have transparency, is that not what we are seeking?
Yes, I agree with my noble friend. The Government have provided the Financial Conduct Authority with tailored powers to deliver a new disclosure regime that is fairer and more proportionate and, as I said in the previous answer, tailored specifically to UK markets. I know that the FCA is engaging extensively with the industry and other interested parties as it looks to finalise its rules.
Does the Minister share my concern about what has happened to investment trusts over the past six to 12 months? What is the Government’s policy regarding saving?
Yes, I do share the noble Baroness’s concern, which is exactly why we have done all the things that I have set out so far in this Answer. The Government’s policy regarding saving is that we think it is a good thing and we want to encourage more of it.