Brokers including Hargreaves Lansdown, Bestinvest and The Share Centre have removed a number of investment trusts and exchange traded funds (ETFs) from their websites because they are not complying with new European documentation legislation which came into force on 1 January 2018.
Investment trusts and other Packaged Retail and Insurance based Investment Products (Priips) now have to produce a Key Information Document (KID) if they want their shares to be sold to retail (private) investors. The document contains information such as performance scenarios, risks and cost data.
Funds that comply with Undertakings For The Collective Investment Of Transferable Securities (Ucits) legislation such as unit trusts, open-ended investment companies and many UK-listed ETFs are not affected.
However, a number of investment trust and ETF providers have failed to meet the deadline meaning platforms and brokers used by retail investors have had to take their products down. But it is expected that the situation should be resolved in the near future - certainly in the case of UK listed investment trusts.
"For investment companies that do not have a KID published on a platform this is largely a transitional issue which is being sorted out swiftly following the festive season," explained Annabel Brodie-Smith, communications director at the Association of Investment Companies. "The European Securities and Markets Authority's most recent guidance on KIDs came out on 20 November so there's been a lot of work for investment companies to do in a short time period.
"Some investment companies which are winding up may have chosen not to produce a KID as they have to include a recommended holding period, and a few may have chosen not to issue a KID as they do not want to be made available to retail investors."
Platform providers say that the missing documentation is now coming in from providers.
"[On 2 January] we removed around 1,500 ETFs and investment trusts from our website as they did not have the correct KIDs," said Danny Cox, head of communications at Hargreaves Lansdown. "Of these, 1,200 are ETFs, most of which we do not expect to go back on the website. Around 300 are investment trusts, 200 of which are US domiciled and will not be going back on. Of the remaining 96, the majority are UK domiciled. If you strip out the institutional classes and those winding up, we expect most to be back on in days not weeks."
By 9 January the number of investment trusts removed from Hargreaves Lansdown's website had fallen to 36.
"Our hands are tied – without the correct KID we cannot have these investments on our website," added Mr Cox. "But this affects a pretty small number of investors. And holders can continue to hold their investment even if it is not on the website, although they can't add to it."
If you hold a fund that is not appearing on Hargreaves Lansdown's website you still own it, will see it under your account and receive any dividends due to you. You can sell it but will have to do this over the phone rather than via the website. However, Mr Cox said for investors in this situation Hargreaves Lansdown is charging its online trading rates rather than its phone trading rates which are more expensive.
The Share Centre said on Tuesday 9 January "the list of investments that investors cannot currently deal in stands at around 200 but this is reducing daily depending on when we receive the correct information in KID format from the [fund providers]. Investors holding the [suspended] investments can sell their holdings but cannot make any new purchases."
As of Tuesday morning, some of the investments that its customers couldn't deal in included Gulf Investment Fund (QIF), Oryx International Growth Fund (OIG) and Baker Steel Resources Trust (BSRT).
Jason Hollands, managing director at Tilney Group, which owns Bestinvest, said:
"Where we have identified investment companies that do not appear to have KIDs in place we have temporarily suspended dealing. The situation has been very fluid, however, as these were coming in thick and fast last week so some trusts were suspended and reinstated within a day. None of the popular investment companies have been suspended."
Barclays Smart Investor had also removed some funds from its website but is "working with the relevant parties to get this resolved for our customers as quickly as possible".
AJ Bell Youinvest is "reviewing all investment trusts and ETFs and the documentation they provide. Any that don't provide the disclosure documents required to comply with Priips/Mifid legislation within the next few weeks will be removed from the platform. The required information is still coming in from providers so we haven't removed any yet."
