The rules for the production of KIDs (Key Information Documents) laid down by the EU have been severely criticised because they may give investors very misleading views on likely future returns from funds. This is because their estimate of future returns are based on short-term historic data. This has caused many fund managers of investment trusts to suggest that they should be ignored and investors look at the other data that the companies publish to get a better view of likely future returns. This writer certainly ignores the KIDs for the investment trusts I hold.
One anomaly is that KIDs are now only required for investment trusts not open-ended funds such as OEICs. Implementation for the latter was delayed and a decision has been made to delay them again. This is what the Association of Investment Companies (AIC) just said about this: “The expected delay to KIDs for UCITS funds is welcome but leaves investors in non-UCITS funds out in the cold. Recent EU proposals to reform KIDs do not address their fundamental failings and will either do no good or make matters worse. Investors now face being misled by KIDs for years to come. As the EU appears unwilling or unable to protect non-UCITS investors, the FCA should take the lead and warn investors not to rely on these documents. It should ensure that the misleading information in KIDs does not pollute other areas of the market, for example by prohibiting it from being used in financial promotions and in search filters on websites.”
It’s worth pointing out that investment trusts are a peculiarly British approach to providing funds to retail investors. In effect the EU has adopted rules that prejudice investment trusts and if our future financial rules are aligned with the EU that prejudice will continue after March 2019.
Incidentally I was somewhat baffled by the furore in Parliament over disclosure of the legal advice on Brexit. The previous legal advice on Brexit was 43 pages long. The new “full” legal advice is 6 pages and does not appear to contain more information. It’s just an executive summary which highlights a few issues. So many MPs and the media are just stirring and creating dissension in my view for no good reason. Perhaps they simply have not read both documents like me.
Neil Mitchell, who has been fighting the Royal Bank of Scotland (RBS) over their actions over the pre-pack administration of Torex Retail for years, has launched a judicial review against the Financial Conduct Authority (FCA) over their failure to disqualify certain executives of RBS involved in the activities of the Global Restructuring (GRG) at RBS. This is the group that is alleged to have connived in destroying good small companies for the benefit of RBS. It looks a difficult judicial review to get even past the first hearing by a judge to me for more than one reason from my knowledge of such cases, but I am no lawyer.
He has also launched a new Claims Management company to pursue legal claims against RBS and other banks on behalf of those aggrieved by what happened in the bank financial crisis and the activities of banks in general. The new platform has a web site here: www.banksclaimsgroup.com . Anyone who thinks they have such a claim needs to look very carefully about how this new group is to be run and financed. There are lots of lawyers keen to earn fees from pursuing such claims but whether they have a realistic prospect of success is often ignored. Also just because folks feel they have a grievance does not mean they have a winnable legal case. And as we have seen from the RBOS Shareholders Action Group, often any awards when won are can be largely diverted to litigation funders and others.
But Neil Mitchell certainly has much knowledge and experience that might be of assistance to others.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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