The Association of Investment Companies has urged the Financial Conduct Authority to “finish what it has started” with its reform of retail disclosures, warning that failure to do so could leave consumers confused.
The AIC said the regulator should swiftly review and reform the post-sale cost disclosures which come under the MiFID rules.
In December, the FCA announced reforms to pre-sale disclosures as part of its rules for Consumer Composite Investments but has not yet reformed the post-sale rules or set out a timeline for doing so.
If post-sale rules are not changed, cost disclosures for consumers who have purchased an investment will be very different to the cost disclosures they received before buying.
This is because post-sale cost disclosures will continue to bundle together the costs of investments, advice and custody, while the pre-sale disclosures will present a more helpful “ongoing costs figure” that provides information about the cost of investment management and allows competing products to be fairly compared, the AIC said.
It is calling for pre-sale and post-sale disclosures to be aligned to protect consumers.
Richard Stone, chief executive of the Association of Investment Companies, said: “The FCA needs to finish what it started with its reform of retail disclosures. Last month it announced how pre-sale disclosures will change, but unless the rules on post-sale disclosures are also swiftly reformed, consumers who buy an investment will be left very confused.
“The costs they are shown after making the investment will be different from what they expected based on the pre-sale information. That could undermine confidence in the disclosures and compromise the Government’s aim of creating an investment culture.”
The AIC is urging the FCA to confirm the timetable and start consulting “without delay”, using the changes being made to pre-sale disclosure as a starting point.
“We think this process needs to be completed as soon as possible so that all cost disclosures are made on the same basis and the deadlines for adopting both pre-sale and post-sale disclosures are aligned.
“The FCA’s recently published regulatory plans for the next two years do not even mention reforming these rules. This issue can’t be allowed to drift. We need the FCA to act quickly,” Stone added.
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