6th June 2013
The UK is facing an imminent threat from EU regulation which could see discretionary and execution-only equity investors having to confirm in writing that they understand what they are buying before being able to do so, Nutmeg.com chief executive Nick Hungerford has warned.
Although Hungerford says he sees a growing trend for investors to take more control of their investments including side-stepping many layers of intermediation, the online discretionary fund managers says the EU move represents a significant increase in EU regulation which the UK must lobby to stop. The change is contained in new regulations designed to protect consumers as part of the Key Information Documents and the Packaged Retail Investment Products legislation.
Speaking at a round table on how equities will be bought and sold in future this week, Hungerford said: “The Key Information Documents and Packaged Retail Investment Products regulations would see everybody in this country have to write to confirm that they understand what they are buying before they buy it and confirm that they are willing to accept it. It is fine in Europe where it helps prevent cold calling which is currently legal. But in this country we have cold calling laws. Can you imagine a situation, which might be the case in a couple of months, where every single person that wants to deal in execution only or discretionary has to write with written approval as a private customer first. These things are going through European law at the moment. We have to work hard to stop them.”
More generally, Hungerford says there is a trend towards more direct and transparent purchasing of equities. He says the share of discretionary mandates of equity trading has declined in two years from 30 per cent two years ago to 21 per cent this year.
“That is real push back from the financial crisis and people not having the control and transparency they wanted over their portfolios. That is going to be a real theme. Do people have the transparency and directness to go into the markets they want. We are looking to join up people who are looking to trade directly with markets without all these intermediaries in between.”