The Investment Association (IA) should not be responsible for developing the Cost Disclosure Code because it is a trade body that is “conflicted” with its members’ interests.
The comments, made by the Transparency Task Force (TTF), are in response to the IA’s consultation on its proposals for the code, which closes today. The IA believes the code provides a “blueprint” for the reporting of charges and transaction costs.
However, the TTF believes that as the IA has a primary duty of care for the commercial interests of its members, it is “too conflicted to be responsible for the development of a costs disclosure code”.
“The extent to which the Investment Association is conflicted with what is best for the consumer has already been seen by their unwillingness to wholeheartedly embrace the idea of putting the investors’ interests first; as evidenced when a clear majority of their members refused to sign up to a code that included the requirement to put the interests of the consumer first.
“That resulted in the departure of their Chief Executive who had been attempting to introduce the ‘put the investor’s interest first’ Code, with unsurprisingly, a great deal of adverse publicity for the Investment Association and consequentially for the asset management industry.”
In addition, the TTF believes the proposed code “falls short of the mark” as there is no effective quality control over the cost data being gathered and there has not been any open scrutiny of the development of the code. It also noted that the code is merely voluntary and said it is not comprehensive.
Therefore, the TTF said it cannot support the Financial Conduct Authority (FCA) in adopting the fund industry’s trade body code, as it should be the FCA that initiates and leads the development of a regulatory framework that mandates for comprehensive cost disclosure, with full industry consultation.
In response an IA spokesperson said: “The technical consultation deadline is today. All responses will be analysed and we will publish the outcome in due course.”