Already we have seen headlines such as 'Goodbye Mr Priips' (a personal favourite of mine - well done, the Association of Investment Companies for that one), and 'Drop the 10% Drop'.
Coming just a few days after the Financial Conduct Authority pushed through thousands of pages worth of proposals and consultations about the future of financial advice and regulated investments, this latest 'rip up and burn' of some of the EU regulations embedded in financial services seems reactionary.
Some of the logs on this bonfire of the regulatory vanities have been sitting in the 'to burn' pile for a long while, however.
We applaud the abolition of Priips.Richard Stone, AICIn 2018, all eyes were on the 10 per cent drop rule as outlined in Mifid II - one of the many European initiatives to regulate and harmonise investment regulations across the continent.
Under Mifid II, the rule meant some clients would receive a notification when their portfolio drops by more than 10 per cent.
Even as far back as 2018 and 2019 commentators had warned this could lead to irrational portfolio actions among clients, not least the fear of them panic-selling in a falling market (as indeed some did when the markets collapsed in March and April 2020 thanks to the Covid-19 pandemic).
As reported by FTAdviser at the time, the FCA had consulted in 2021 on dropping the controversial rule and, with platforms and discretionary managers already being told late last year they had a further 12-month reprieve when it comes to warning clients of drops of more than 10 per cent, this seems like a sensible move.
Given how shaky markets have been this year with Putin's unjustifiable war against Ukraine, it makes sense to drop the drop altogether.
Priips
Then came the FCA's consultation on how investors should be informed about their investments, and what sort of information they should need instead of the key information documents.
This was after HM Treasury announced on December 9 the regime was 'not fit for purpose'.
This would see the Priips and Ucits regulations chucked on the bonfire. I mean, that's over 20 years of my life writing on investments gone right there, not least the fun I've had in asking newcomers to tell me what the acronym 'Ucits' stands for, but the industry seems to have welcomed it.
Will the FCA even be called the FCA in 2024? As Richard Stone, chief executive of the AIC said: “The investment company industry has just breathed a collective sigh of relief on seeing the proposed abolition of the Priips regulation. We have lobbied long and hard for the abolition of Key Information Documents which dangerously mislead investment company investors.
“We applaud the abolition of Priips and will be arguing for a disclosure regime which helps investors make better investment decisions and puts investment companies and open-ended funds on a level playing field.
"The FCA should act swiftly to sweep away the confusing mishmash of disclosures and put in place a fair and transparent framework.”
Cost
As expected since the June 2016 vote to leave the European Union, and subsequent Queen's Speeches, the government has always intended to unravel EU-led legislation and free up UK financial services to govern itself.
It makes sense, given how different the advice market is in the UK from Europe, where bancassurers and agents operate very differently from regulated independent financial advisers in the UK.
But when you think about the immense cost to the industry (and even to the FCA and its antecedents the FSA et al) in having to implement these regulations over the past 20 to 30 years, the mind boggles.
How much compliance cost has gone into implementing these regulations? And how much more will be spent in undoing all of these?
Just as firms are grappling with consumer duty, they must undo what they have already done, and then start again from scratch.
It also begs the question of where this leaves the FCA. As FTAdviser (and Financial Adviser before it) has intimated for many years since Brexit, is the Treasury going to unveil an overhaul not just of the regime but the figurehead of the regulatory regime?
Will the FCA even be called the FCA in 2024?
I guess when you're throwing stuff onto a bonfire, you have to be careful not to get burned yourself.
Simoney Kyriakou is editor of FTAdviser
