Temporary Measures: FCA Allows Investment Companies to Break Down Costs

<p>The
Financial Conduct Authority (FCA) has introduced temporary measures to allow
investment companies in enhancing the clarity of their cost disclosure, aiding
consumers in making well-informed investment decisions. Recognizing concerns
about current disclosure obligations generating unclear cost information, the
FCA permits funds to provide a factual breakdown of their costs.</p><p>Navigating
Legislative Adjustments: FCA's Changes to Cost Disclosure</p><p>The
introduced measures enable funds to provide additional context, particularly
when the current legislative requirement for an aggregate figure may not
accurately represent ongoing costs. The FCA has clarified that these measures
are not a long-term solution.</p><p>Investment
companies and funds investing in them are encouraged to consider incorporating
this additional information into their broader disclosure documents. Firms are
also expected to evaluate their obligations under the Consumer Duty. These
changes align with the FCA's objectives under the Consumer Duty, ensuring
consumers receive timely and comprehensible information.</p><p>The
FCA is pursuing changes to the cost-disclosure regime, contingent on
legislative adjustments, including the revocation of the PRIIPs Regulation.
Following the Treasury's commitment to repealing relevant MiFID cost and
charges provisions, the FCA anticipates designing a cost disclosure framework.
The agency looks forward to implementing a retail disclosure regime in the
future.</p><p>FCA's
Proposals: Capital Reserves for Consumer Compensation</p><p>In
an earlier report by <a href="https://www.financemagnates.com/">Finance
Magnates</a>, it was highlighted that <a href="https://www.financemagnates.com/forex/fca-implements-polluter-pays-rule-to-safeguard-personal-investments/">the
FCA introduced proposals</a> mandating personal investment firms to maintain
sufficient capital reserves for compensating consumers affected by inadequate
financial advice. The initiative adopts a "polluter pays" principle,
holding firms accountable for the financial consequences of harmful advice. </p><p>Under
the proposals, investment advisors must assess potential redress liabilities,
ensuring adequate capital for compensation. Firms falling short will face
automatic asset retention rules. This measure responds to the Financial
Services Compensation Scheme disbursing £760 million from 2016 to 2022 for
substandard advice, primarily from 75 firms.</p><p>Sarah
Pritchard, FCA's Executive Director of Markets and International, emphasizes
the need for a resilient financial advice market to alleviate the unfair burden
on diligent advisors. The FCA seeks industry and consumer group feedback,
planning extensive outreach during the 16-week consultation. About
500 sole traders and prudentially supervised groups are exempt. The proposals
align with the FCA's consumer investments strategy and three-year strategy
focused on reducing harm and setting higher standards.</p><p>In
regulatory updates, the FCA addresses dormant licenses, influencing over 1,100
business lines. The Q3 report highlights reviews of 5,300 financial promotions,
aligning with stricter rules for crypto assets. The <a href="https://www.financemagnates.com/tag/fca/">FCA</a> updates guidance for
crypto asset firms, providing a transition period for compliance with marketing
regulations.</p>

This article was written by Tareq Sikder at www.financemagnates.com.