On Friday (8 November), the TSC published a report on the progress made on Chancellor Jeremy Hunt's Edinburgh Reforms in the last year, examining the 31 "strands" of work which the chancellor outlined as the main focus of the reforms.
While the Treasury said the chancellor had completed 21 of the 31 reforms in the first year, analysis by the TSC found six of the actions marked as ‘delivered' by the government had not yet been completed.
According to the committee, a further six measures should not be considered as reforms as they relate to actions such as publishing a document or welcoming a consultation. Moreover, it found that the reforms had "limited impact of the government's flagship financial services reform programme".
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As well as finding the progress "disappointing", the committee considered the government's intention to repeal EU legislation on the European Long-Term Investment Fund (ELTIF), reflecting that the new UK LTAF "provides a better fund structure for the UK market".
MPs agreed with the Treasury that it was a "genuine reform" and it was one of the commitments that "had been delivered", as the commencement regulations to repeal EU legislation on ELTIF were made on 10 July, as part of the Mansion House reforms.
However, they voiced concerns over the LTAF structure following the failure of London Capital & Finance (LCF), which collapsed in 2019 after more than 11,000 retail customers faced losing their savings in a series of events driven by its mini-bonds promotion, which promised returns as high as 8%.
The TSC said it had raised concerns with the Financial Conduct Authority about the risks to widening retail investment in Long-Term Asset Funds, since they are "riskier non-liquid assets".
"These concerns are in part formed by our work looking into the failure of London Capital and Finance, and the role of promoters in potentially misusing exemptions for high net-worth individuals and so-called sophisticated investors, to garner greater sales," it said.
"The sub-committee continues to have concerns in this area, and therefore about the protections the FCA is, in part, drawing upon for Long-term asset fund sales to a wider range of retail investors."
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Regarding the LTAF, the committee said it wrote to the Financial Conduct Authority on 28 October 2022 "raising its concerns around the protections that would be in place for retail investors when investing in such asset".
MPs said that Nikhil Rathi, chief executive of the FCA, responded with an outline of the "protections that the FCA were putting in place for retail investors".
"He said that the FCA was not designing this new product to be risk free, and investors would be taking on higher levels of risk, but should be informed when doing so," the committee noted.
MPs agreed with the Treasury that the UK's regulators should consider economic growth when designing new regulations, and that "the best way" to promote economic growth in the UK is through a "strong, well respected, independently regulated, and financially resilient financial services sector".