Effective immediately, the Treasury and the Financial Conduct Authority (FCA) have announced the temporary exemption of investment trusts from assimilated law requirements by the European Union, along with their plan to replace the country's retail disclosure rules with a new framework "as soon as possible". We are pleased that the government has prioritised this early in the new parliament.

Following a treasury consultation the EU-inherited Packaged Retail and Insurance-based Investment Products (PRIIPs) will be replaced with a new regime, Consumer Composite Investments (CCIs), expected to be in place in H1 2025 following parliamentary reading’s this autumn.

The release from PRIIP regulation will be an immediate and considerable improvement for the environment in which trusts operate, most notably for cost. The ‘double count’ has made investment trusts nominally too expensive for many looking to buy into funds, and a reduction in fees is a positive first step to encourage investment, especially from wealth managers. The treasury’s commitment to these changes, alongside broader reform next year is an exciting moment the future of UK capital markets.

With the aim of ‘tailoring more flexible and transparent rules’ under the CCI’s regime, the government is beginning to address long-standing concerns regarding the competitiveness of the UK equities market. The new framework, says the treasury, “will be proportionate and will allow more bespoke arrangements to address concerns that have been raised with the current PRIIPs framework”.

Given that many investment trusts are constituents of both the FTSE 100 and FTSE 250, a new framework has the potential to attract both domestic and international investors, creating a more level playing field for investment trusts which have long been disadvantage compared to other vehicles.

While we wait on further updates on implementation in the coming months, the government’s announcement is an encouraging step towards modernising disclosure rules, supporting investor confidence, and reinvigorating the UK’s equity markets, and one that we welcome.

The FCA consultation on proposed rules will launch this autumn, which will give all market participants the opportunity to feed into the new CCI regime.