FCA sets out temporary measures to address investment trust cost disclosure concerns

investmentweek.co.uk:

The FCA acknowledged the concerns that cost disclosures under the EU laws 'may not result in representative cost information being published'.

The regulator's move follows concerns raised about the costs and charges disclosure for listed closed-ended funds under EU-inherited requirements, such as PRIIPs and MiFID II, which have made investment trust costs look artificially expensive.

In a statement published today (30 November), the FCA acknowledged concerns that cost disclosures under the EU laws «may not result in representative cost information being published».

This included the fact that some costs investment trusts are required to disclose are then aggregated into other products, including multi-asset vehicles and funds of funds that invest in them.

Autumn Statement 23: FCA mulls 'interim solutions' to address investment trust cost disclosure concerns

With consultation on new disclosure rules set to take place in the first half of 2024, the FCA has provided a short-term leeway, allowing investment trusts and the funds invested in them to provide clients with a breakdown of costs, rather than the current single all-in cost figure.

Investment trusts will now be able to provide additional context where they are concerned that the aggregate figure currently required by legislation «does not actually reflect ongoing costs». The regulator said this measure is «not intended as a long-term solution, but is a step towards wider reform».   

For instance, investment trusts will be able to clearly specify which costs are related to corporate costs and investment costs, while funds will be able to explain how their own aggregate figures are affected by the trusts' costs. If firms decide to do this, the regulator will not take