Alternative Investment Fund Managers Regulations 2013

Baroness Altmann Excerpts

Monday 13th November 2023 Lords Chamber

Asked by

[Baroness Altmann]

To ask His Majesty’s Government what assessment they have made of the impact of disclosure obligations under the Alternative Investment Fund Managers Regulations 2013 on UK-listed investment companies, in terms of competition, consumer duty, exclusion from investor platforms, and funding crisis for such companies investing in UK small growth businesses, renewable energy and infrastructure.

[The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)]

My Lords, the Government and the Financial Conduct Authority understand industry concerns regarding investment company cost disclosure requirements. The issue sits across multiple areas of legislation and we are working at pace to repeal retained EU law under the smarter regulatory framework, enabling the FCA to deliver UK-tailored rules. On the alternative investment fund managers directive specifically, work has already started on plans for reform, with a discussion paper issued by the FCA in February.

[Baroness Altmann (Con)]

I thank my noble friend. However, does she recognise that an important UK financial sector is being undermined by selling pressure based on exaggerated reported charges figures? These listed, closed-ended investment companies and their institutional investors support British companies in areas including battery storage and wind and solar farms, and offer particularly suitable vehicles for pension funds and other investors in sustainable growth. However, they are deterred by misleading aggregated costs, including by retail investor platforms. Has the Minister’s department urged emergency action following FCA failure to protect the market stability, international competitiveness, fair competition and the consumer duty?

[Baroness Penn (Con)]

My Lords, I agree with my noble friend in recognising that investment trusts play a vital role in raising capital for infrastructure projects across the UK. The FCA is of course independent, but I understand that it is taking forward work to look at what can be done in this area while we take forward the wider programme of measures to repeal retained EU law and replace it with UK rules that will help to address the issue that she raises.

--- Later in debate ---

[Baroness Penn (Con)]

My noble friend is absolutely right. The Government consulted extensively when the Alternative Investment Fund Managers Regulations were introduced. That was some time ago but, as part of the smarter regulatory framework, we are working closely with the FCA to explore what changes can be made to AIFMD to make it more streamlined and tailored to UK markets. I assure all noble Lords that that work is being taken forward with urgency.

[Baroness Altmann (Con)]

My Lords, may I press my noble friend? She says the FCA has regulatory powers for forbearance. Given that this is EU-derived legislation that has been misapplied in the UK, no EU country adopts it, no other country in the world adopts it and it is uniquely disadvantaging British companies, is there not a case for emergency action from the FCA once it is aware of this particular problem?

[Baroness Penn (Con)]

My Lords, the FCA can apply forbearance when it comes to its rules, but it cannot when it comes to the law; it is for this House to amend the law. I set out that the Government intend to look at the various pieces of underlying EU legislation, including PRIIPs and MiFID, to ensure we address the underlying problem as well as applying forbearance while that work is under way.