Parliamentary.ai

Overview

This bill clarifies the legal classification and characteristics of Listed Closed-End Investment Companies (LCICs) in the UK, aiming to distinguish them from other investment vehicles and simplify their regulation. It amends existing regulations to ensure that LCICs are treated appropriately, considering their unique structure and how their costs are handled.

Description

The bill focuses on defining LCICs and how they should be treated under UK financial regulations. Key aspects include:

• Defining LCICs: The bill explicitly defines LCICs as closed-end collective investment undertakings traded on UK recognised investment exchanges, differentiating them from open-ended funds, unit trusts, and ETFs.
• Share Valuation: The bill establishes that the value of LCIC shares is determined by their market price, not their net asset value.
• Shareholder Rights: It clarifies that LCIC shareholders do not have the right to redeem their shares at will, unlike in open-ended funds. Redemption only occurs under specific circumstances (winding-up, etc.).
• Cost Allocation: The bill specifies that LCIC management expenses are deducted from the fund's net asset value, not directly from shareholder investments. This is crucial for transparency and accurate reporting.
• Regulatory Compliance: The bill mandates that regulators (FCA, TPR, and others) consider the specific characteristics of LCICs when applying rules and interpreting legislation.
• EU Regulation Amendment: The bill amends the Commission Delegated Regulation (EU) 2017/565, specifically clarifying how costs and charges related to LCICs are reported and disclosed. This avoids unnecessary aggregation and ensures accurate reporting of the share price as the value of LCICs.

Government Spending

The bill is not expected to have a significant direct impact on UK government spending. The primary effect is regulatory clarification, aiming for better oversight and potentially reduced regulatory burden in the long term, though no concrete figures are provided.

Groups Affected

• Listed Closed-End Investment Companies (LCICs): This bill directly affects LCICs by providing a clearer legal framework for their operation and regulation.
• Investors in LCICs: The bill aims to enhance transparency regarding the costs and valuation of LCICs, potentially benefiting investors.
• Financial Regulators (FCA, TPR): The bill impacts regulators by providing clearer guidance on how to treat LCICs within existing regulations.
• Investment Firms: The amendment to EU Regulation 2017/565 specifically impacts investment firms by simplifying reporting requirements related to LCICs.