In an effort to facilitate retail investment, the U.K.’s Financial Conduct Authority (FCA) is proposing to reduce the cost disclosure that firms are required to provide under its new regulatory regime for certain retail products.
The FCA is adopting a new regulatory framework for “consumer composite investments” that will cover investment funds and other retail investment vehicles. On Wednesday, it launched a consultation on proposed changes to the disclosure rules for the products that will fall under the new regime.
“We want a simpler and more flexible retail disclosure regime that gives consumers higher quality and more useful information and empowers firms to design more engaging ways of communicating that information to consumers,” the paper said.
To that end, the regulator is proposing changes to the cost disclosure that investors receive.
In particular, it’s planning to drop the requirement for firms to calculate and disclose implicit transactions costs — such as bid-ask spreads, and the small differences that can arise between the price an order executes at, and the price when it was sent to the market.
These costs are “often quite small,” and are typically out of the control of the firm, the paper said. Dropping the requirement to disclose them “would remove a significant compliance requirement for firms, while ensuring that consumers are still provided with the most relevant information about product transaction costs,” it said.
Firms would still be required to disclose “explicit” transaction costs under the new regime. The proposals also include other changes designed to harmonize other cost disclosure requirements with the new regime, and they would require certain investment product manufacturers that aren’t otherwise subject to U.K. rules to adopt complaint handling procedures.
The consultation is open until May 28.
The FCA said that it intends to to issue final rules by the end of this year.