FCA rebukes 48 investment firms for Mifid II disclosure failures

By Daniela Esnerova

Go to the profile of Money Marketing
Feb 05, 2019

Forty-eight investment companies are under investigation for failing to disclose costs in line with the Mifid II regulation, according to The Times. The Markets in Financial Instruments Directive II came in to force 3 January 2018 and it brought an obligation to disclose all fund fees upfront. The FCA has disclosed the number firms it is investigating in response to Freedom of Information last week.

FCA building FCA fees

This means the number of firms targeted by the regulator has increased slightly in recent months. Last October, the regulator said that it had contacted 34 non-complying fund management companies in reply to an FOI by SCM Direct wealth management director Gina Miller.

Earlier this month, SCM Direct’s co-director Alan Miller told Money Marketing the number of noncomliant firms are in the thousands.

Neither of the FCA’s responses – the one from last October, as well as the one from last week – state whether the regulator took any action against the firms it had contacted.

When Miller criticized the regulator for failure to tackle the noncomplying companies, the FCA said: “Enforcement is not the only regulatory tool at our disposal, nor is it the most appropriate one to use in every case.

“The FCA will act proportionately and not take a strict liability approach in relation to enforcement of Mifid II, given the size, complexity, and magnitude of the changes that are required to be in place in firms.”

Research by The Times last month found while some fund supermarket platforms – like Hargreaves Lansdown, Fidelity International and Tilney Bestinvest – present potential clients full cost of investing including the cost of a fund, transaction fees and platform charges, before a sale. However, it also revealed that clients at other platforms might not know how much they are due to pay until after they open an account with them.

Interactive Investor was one of the platforms that fell into the latter category. II head of personal finance Moira O’Neill says: “Since we are a direct to consumer platform, we want to be able to demonstrate that the customer was provided with the relevant disclosure on a per-transaction basis.

“This means that the only point in the buying journey at which we can present the information and ensure compliance is at the point that the customer clicks on ‘buy’. This is at the start of the buying journey, and is pre-sale and meets both the strict requirement and the spirit of the regulation.

“Whilst the Mifid II rules come with good intentions, and can be very useful to customers, one year on the changes are still very much bedding down and comparisons between providers is fraught with difficulties. This is because there seems to be little consistency across the industry when it comes to interpreting the calculations.

“The only overriding certainty, then, is the platform cost itself. Ours are very clearly laid out on our main site, for all consumers. Most firms charge on a percentage of client assets, whereas interactive investor charge a flat fee which does not go up as you increase your assets. We believe our platform fees are the most transparent in the market.”

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