Investment companies escape Mifid II rule tightening

Investment companies escape Mifid II rule tightening

Investment companies should not be automatically branded as ‘complex’, the finance regulator has said.

In a paper on Mifid II, which is due to be implemented early next year, the Financial Conduct Authority, stated investing in investment company shares should not just be for sophisticated investors.

The industry has welcomed the backing of the watchdog, saying a move to brand all investment company shares as complex would be "incorrect legally and in principle".

Ian Sayers, chief executive of the Association of Investment Companies, said: "Investment company shares should be tested against the common criteria, which will mean that virtually all of them will continue to be non-complex."

MiFID II will require any firms which distribute so-called ‘complex’ products without advice to assess the level of knowledge and understanding of retail investors before allowing them to buy or sell the investments.

It had been suggested that all investment companies will fall into this category.

Dennis Hall, chief executive at Yellowtail Financial Planning, said: "I think this is a very sensible move. There is no reason to make it difficult for investors to access investments which generally have lower fees, better governance and often better performance than their open-ended counterparts."

Mr Sayers added: "Designating investment company shares as automatically complex risked disrupting the market and placing investment companies at a disadvantage to competing investment products."