UK Watchdog Shakes Up Retail Rules to Boost British Investing
TL;DR
The UK's Financial Conduct Authority is reforming retail investment rules to simplify processes and encourage more Britons to invest, including replacing key information documents with product summaries and allowing experienced investors to opt out of retail protections.
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The Financial Conduct Authority is planning to change a swathe of rules to make it easier for Britons to invest their own money in markets.
Investment firms will no longer need to produce key information documents for retail products, but will instead publish simpler “product summaries,” the FCA confirmed in a statement on Monday.
The regulator also set out plans to draw “a brighter line” between retail and professional investors. Individuals with £10 million or above and those with investing experience can opt out of retail classification, enabling them to invest in riskier products while removing protections such as the FCA’s two-year-old consumer duty.
The measures “support investment risk culture right along the spectrum,” said Simon Walls, executive director of markets at the FCA. “They ensure that firms can compete to give retail customers material that informs and engages them.”
Investment culture in the UK has lagged behind other developed nations, and regulators are following the government’s lead in encouraging households to shift more cash savings into the financial markets. The cash limit on ISA accounts was cut to £12,000 in Chancellor of the Exchequer Rachel Reeves’s budget last month.
Investment firms and others can comment on the FCA’s proposals until March 6. The regulator said it’s striking a balance between the possibilities of investing and protecting consumers, citing research that found 34% of Britons are hesitant to invest because of the threat of potential scams. At the same time, a growing cohort of Brits are using crypto and trading apps, which aren’t always regulated.
Stoking more retail engagement could also help the FCA with its efforts to revive trading activity on the London Stock Exchange, which has declined in recent years. Last month, the regulator announced plans to unify trading data in the equity markets to encourage companies to list in the City.
Read More: UK Plans Unified Equity Trading Data to Combat Liquidity Doubts
“This is another step in the right direction from the FCA that will add to the growing momentum in London’s IPO market,” said Jonathan Parry, partner in the capital markets group at the law firm White & Case LLP.