FCA Consults on Fund Product Information and Cost Disclosure CP24/30 – ShareSoc Responds

In November 2024, the FCA launched a consultation on a proposed product information and cost disclosure regime for funds – now referred to by the regulator as CCIs (Composite Consumer Investments). 

ShareSoc has become increasingly concerned in recent years by the divergent and often perverse implementations of cost disclosure by UK retail platforms under the EU regulations for Packaged Retail and Insurance-Based Investment Products (PRIIPS) and MiFID II.

A particular area of concern has been listed closed-end funds (investment companies and investment trusts), for which the PRIIPS disclosures (prior to the exemption allowed by the FCA late last year) have been highly misleading and damaging.

We have witnessed cases of retail platforms issuing cost information which clearly disadvantages certain investment products. In some cases, platforms have actively obstructed client access to products based on an over-zealous interpretation of their Consumer Duty responsibilities.

We believe that regulatory disclosure requirements and restrictions are, in some cases, being abused by some retail platforms for their own commercial benefit.

In addition to its answers to the FCA’s 41 specific questions, ShareSoc’s Policy Committee has responded to the consultation as follows:

Investment companies engage in a vast spectrum of activities – from holding listed portfolios of stocks (like those held by OEICs) to maintaining private holdings in private non-listed enterprises (like those held by listed commercial holding companies) and extending to alternative assets such as private debt.

The discount (or premium) at which an investment company’s shares trade reflects, among other things, the market’s assessment of the value proposition – effectively discounting a future stream of internal charges. Highlighting those charges without reference to the share premium / discount can create the misleading impression that charges will erode share price over time. This practice has damaged investment companies.

While there is some argument for inclusion of investment companies whose portfolio substantially or entirely comprises listed shares, ShareSoc believes there is an equally strong argument to treat other investment companies as listed commercial companies and to exempt these from purely formulaic reporting under the CCI regime.

To the extent investment companies are required to report, the disclosure should carry a legend noting that costs are general corporate expenses not directly chargeable to the shareholder, that they are expressed as a percentage of net asset value (NAV), not market price, and that their impact on future returns is reflected in the share price.

Our full response is here.

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