The Financial Conduct Authority has hit back at claims made by Gina Miller, founding partner of SCM Direct, that it has failed to enforce consumer transparency and protection laws.
Ms Miller said through a Freedom of Information request to the Financial Conduct Authority she has discovered a raft of instances where investment managers had failed to disclose their fees in line with requirements under Mifid II.
The new rules, which came in to force in January, require providers and distributors of investment products to disclose all costs and charges to consumers in one number.
The driver of these rules is to allow consumers to more easily compare products and services on offer in the market and potentially save millions of pounds each year.
In April 2018 SCM Direct reviewed the market and has claimed to have uncovered breaches of this rule by more than 50 major firms.
A follow-up between SCM Direct and the FCA found no firms had been referred for enforcement for investigation of their non-compliance.
Just six firms had reported themselves to the regulator and the FCA had written to just eight firms, despite receiving the dossier showing 50 were in breach.
Ms Miller, become the figurehead in the case to get Parliament to vote on the Brexit process, said she wants HM Treasury to demand the FCA urgently investigate and report back to regarding its lack of enforcement activity in this matter.
She said: "The FCA has had numerous opportunities to publicly state that it will take enforcement action against firms that breach new costs disclosure laws and has failed to so.
"The message this failure is sending to the market is that the FCA does not consider breach of such laws to be important."
She added that the FCA had a statutory objective to promote effective competition in the interest of consumers.
Ms Miller said: "But if consumers don't know what they are paying for their investments, competition can never be effective."
A spokesman for the FCA said enforcement wasn't the only regulatory tool at the City watchdog's disposal, nor was it the most appropriate one to use in every case.
The spokesman said: "We decide whether to take enforcement action based on whether we believe there has been serious misconduct, considering factors such as intent to do wrong, failure to act on feedback or negligence or recklessness.
"Mifid II only came into force on 3 January 2018. 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.
"This means we have no intention of taking enforcement action against firms for not meeting all the requirements straight away where there is evidence they have taken sufficient steps to meet the new obligations by 3 January 2018 – rather the FCA will work with such firms to enable them to meet the requirements.
"However, where firms have made no real or genuine attempt to be ready, or where key obligations are deliberately flouted, the FCA will take a much stricter approach."
Ms Miller said she has been told by a major litigation funder that it believes investors who have suffered loss due to the failure of firms to disclose the full costs and fees, would be entitled to recoup any losses via High Court litigation.
Ms Miller added SCM Direct is investigating the merits of a group action to claim such compensation on behalf of individual and institutional investors.
Alan Miller, founding partner and chief investment officer of SCM Direct, said: “The FCA may foolishly believe that it is helping the industry by turning a blind eye. Instead the FCA is creating a landscape for multi-million-pound claims from litigation funds, who can step in on behalf of thousands of clients, who have been misled in relation to the costs and charges of their savings and investments."
