Calls for reforms to the regulation of alternative investment funds were made in the House of Lords this afternoon (November 13).
Baroness Ros Altmann tabled a private members bill asking for the government to remove investment companies from the Alternative Investment Fund Managers Directive (AIFMD) regulation, introduced in the wake of the financial crisis in 2013.
She claimed the sector was being “undermined” by the rules which treat investment trusts as collective investment vehicles, rather than as equities.
This means the total costs incurred by a trust must be shared with a client, and means fund of fund investors and model portfolios are less able to invest in the asset class.
It can mean the audit fee paid by an investment trust must be reported as part of the ongoing charges of owning the trust, while listed companies do not have to report these costs as part of the ownership.
Baroness Altmann told the House of Lords: “An important UK financial sector is being undermined by selling pressure based on exaggerated reported charges figures.
“These listed, closed-ended investment companies and their institutional investors support British companies in areas including battery storage, wind and solar farms and offer particularly suitable vehicles for pension funds and other investors in sustainable growth.
“But they are deterred by misleading aggregated costs, including by retail investor platforms.
“Has the department urged emergency action following FCA failure to protect the market stability, international competitiveness, fair competition and consumer duty?”
Treasury Lords minister Baroness Joanna Penn said the issue sits across multiple areas of legislation and assured that the government was working “at pace to repeal retained EU law”.
She added that the FCA was also looking at what can be done in this area.
Baroness Penn said: “The FCA does have the appropriate powers to implement regulatory forbearance where it considers it appropriate, but it must operate within the legal framework and it doesn't have the powers to amend legislation that is for this house to do so.
“Forbearance can only be a temporary short term fix, which is why the government is committed to repealing and replacing retained EU law, including legislation related to cost disclosure under our smarter regulatory framework.”
tara.o'connor@ft.com
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