The Financial Conduct Authority (FCA) today reconfirmed that investment company shares should not be automatically ‘complex’ for the purposes of MiFID II. This welcome development was confirmed in the FCA’s document, Markets in Financial Instruments Directive II Implementation – Policy Statement II.
Ian Sayers, Chief Executive of the Association of Investment Companies (AIC) said: “We very much welcome the FCA’s announcement. This is positive news for investment company investors who will be able to buy investment companies as they do today, without unnecessary obstacles being put in their way. This provides much needed certainty as we approach implementation in early 2018.”
This FCA statement confirms that investment company shares should not be treated as automatically complex, which is incorrect legally and in principle. Investment company shares should be tested against the common criteria which will mean that virtually all investment company shares will continue to be non-complex.
MiFID II requires firms distributing ‘complex’ products without advice to assess the ‘knowledge and understanding’ of retail investors before allowing them to buy and sell them. The ordinary shares of investment companies are not considered complex, thereby avoiding any such assessment.
Previously it had been suggested that the shares of investment companies traded on regulated markets should be treated as automatically complex. The AIC did not agree with this view, considering it wrong on both legal and policy grounds. Designating investment company shares as automatically complex risked disrupting the market and placing investment companies at a disadvantage to competing investment products.