LONDON (Reuters) - Some of Britain’s biggest investment platforms have stopped taking fresh money into hundreds of exchange-traded funds (ETFs) and investment trusts after they failed to meet new European Union rules in time.
Hargreaves Lansdown (HRGV.L) and Bestinvest said they had been forced to act after the funds were too slow or refused to provide information required under the EU’s new Packaged Retail and Insurance-based Investment Products (PRIIPs) legislation.
Bestinvest and another platform firm, AJ Bell, said they were still reviewing fund documentation and more suspensions could follow. Standard Life Aberdeen said all UK and European funds on its platform were compliant by the deadline.
Charles Stanley and Interactive Investor were not able to immediately confirm whether they had suspended any funds.
The suspensions will limit choice for investors, though some analysts say the industry has long been oversupplied, and they mark an embarrassing admission that parts of the investment sector have been too slow to implement major new regulations.
The rules took effect on Jan. 1 and require each fund to have a new Key Information Document (KID) available online for investors. The aim is to give information in a standardised format so investors can compare risks and costs across products and providers.
With the rules not finalised until September 2017, investment trusts had not had much time to get the relevant information in place, said Ian Sayers, chief executive of trade body The Association of Investment Companies (AIC).
“Something that should have had 12 months as a transitional period ended up with a matter of weeks,” he said, adding he expected most funds to comply with the rules relatively quickly.
The Financial Conduct Authority, which regulates the sector, had no immediate comment.
More important, Sayers said, was whether the new information was useful for investors, with projections for future risk and returns coloured by recent strong performance for many funds as a result of easy central bank liquidity that few expect to last.
The launch of PRIIPs coincided with an even bigger set of new rules on Jan. 3 - the European Union’s Markets in Financial Instruments Directive II, or MiFID II - which further complicated the efforts of some to get ready on time.
The introduction of MiFID II generally went off without a hitch, the European regulator said on Wednesday, although some participants were given a last-minute waiver.
Hargreaves Lansdown, Britain’s biggest online investment platform, said it had suspended around 1,200 ETFs and 300 investment trusts from its website on Tuesday as they had not supplied the correct KIDs in time. That equates to about a third of ETFs and just under a half of trusts on the platform.
The funds remain on the platform, but are not visible on the website and the company said it would not accept any fresh money from either new or existing clients into the funds.
Around 900 of the ETFs are U.S.-based and Hargreaves spokesman Danny Cox said he did not expect them to ever provide the correct KIDs. The other 300 are Europe-based and would likely provide them over time.
Of the 300 investment trusts, funds listed on the stock exchange as companies, around 200 are predominantly U.S.-based and not likely to comply, Cox said. “My understanding is that UK distribution by U.S. domiciled investment trusts and ETFs isn’t a priority for them.”
Of the remaining 96 investment trusts, the majority are UK-based and Cox, confirming earlier reports, said he expected them to provide the correct information and return to the website.
“The situation is moving, 10 are already back on and we are putting investments back onto the website as and when they provide the correct KID,” Cox said. “To put this into context, the vast majority of Hargreaves Lansdown investors hold UK-domiciled investments and are unaffected by this issue.”
Bestinvest, meanwhile, said it had suspended an unspecified number of investment trusts, including Sanditon Investment Trust, but at least two had since complied with the rules and were now available again.
“We are working with our data vendor to identify cases where PRIIP-compliant documentation is not in place and, where this is the case, we have and will temporarily suspend access to dealing in these,” a spokesman for Bestinvest said.
“The situation is incredibly fluid as trusts have been rapidly supplying these over the last couple of days.”
Additional reporting by Huw Jones; Editing by Mark Potter