The Association of Investment Companies has welcomed the FCA decision not to consider investment company shares to be automatically ‘complex’ under Mifid II.
The AIC says the suggestion that investment trusts should fall under this definition had put them at a competitive disadvantage to other investment products.
Retail investors in complex products must be assessed for “knowledge and understanding” by distributing firms if they are buying them without advice.
But the FCA says: “Our view of the Mifid II provisions on complex and non-complex financial instruments is that, as in Mifid, Non-Ucits Retail Schemes and investment trusts are neither automatically non-complex nor automatically complex.
Its view was published in its consultation paper on Mifid II – its third on the directive – which was printed on Thursday.
The consultation document says: “They need to be assessed against the criteria in the Mifid II delegated regulation. When firms apply these criteria, they should adopt a cautious approach if there is any doubt as to whether a financial instrument is non-complex.”
Ordinary shares of investment companies are currently not considered complex.
The AIC says defining investment company shares as automatically complex risked “disrupting the market” and did not favour competition.
AIC chief executive Ian Sayers says: “This is a very welcome announcement by the FCA. The AIC has consistently argued that the view that investment company shares should be treated as ‘automatically complex’ was incorrect legally, as well as wrong in principle.
“Allowing products to be tested consistently against common criteria creates a level playing field and will mean that virtually all investment company shares will continue to be treated as non-complex. We will continue to work with the FCA to ensure that this position is adopted after the consultation.”