What started as an investigation into the widespread mis-selling practice known as “closet indexing” (claiming active fund management, whilst in reality merely tracking an index) has now taken on a new dimension. When it replicated the study into closet indexing by the European Securities and Markets Authority (ESMA) in 2017 (and, unlike ESMA, disclosed the names of the 165 UCITS equity funds that were identified according to ESMA’s methods as “potentially” falsely active) BETTER FINANCE regrettably also discovered widespread breaches of key EU disclosure rules for investors. BETTER FINANCE immediately brought this worrying issue to the attention of EU regulators, only to find that more than one year later these violations of EU fund key disclosure rules still endure.
With the exception of the UK’s Financial Conduct Authority (FCA) who recently forced 64 UK domiciled closet index funds to indemnify clients, other national supervisors are dragging their feet.
Read the full press release here.