UK fund managers must improve fairness

The UK's financial services conduct regulator has released new rules for fund managers as part of its ongoing study into the asset management market.

The latest Financial Conduct Authority (FCA) report states that fund managers, as the agents of investors in their funds, must appoint two independent board directors.

Fund managers must also adhere to changes which improve fairness around profits made from investors buying and selling their funds; and facilitate the movement of investors into cheaper share classes.

Additionally the FCA is requiring fund managers to "make an annual assessment of value"; and subscribe to a Senior Managers and Certification Regime which brings "individual focus and accountability."

"These measures will deliver better protection for all investors, both those who are actively engaged with their investments and those who don't follow their investments closely," the FCA said.

Fund managers have 18 months to comply with the rules on assessment of value and to appoint independent directors. They have 12 months to implement the rules around profits. The study has been going for more than 2.5 years.

To address the FCA's concerns that even actively engaged investors do not find it easy to choose which fund is right for them, the regulator published further consultation on remedies related to funds providing better information about what they are offering.

This includes proposals on how fund objectives can be expressed more clearly and be more useful to investors; making it clearer when funds are benchmark-constrained, or limited in how far their holdings can differ from the weightings of a benchmark index; and ensuring that where a fund uses one or more benchmarks, this is disclosed consistently and explained to investors.

The FCA also published an occasional paper setting out the results of behavioural research which looked at how different ways of presenting information about charges affected investors' decision-making and their understanding and awareness of charges.

FCA executive director of strategy and competition Christopher Woolard said: "The investment choices open to people, and the decisions they make on how to invest, can have a profound impact on their financial health."

"They can also have consequences for their families, as well as society as a whole," he said.

"That's why it is important the asset management industry, which looks after the savings of millions of investors, is working as well as possible. But our market study found evidence of weak price competition in a number of areas.

"Today's announcements are an important part of a package of measures that, combined, aim to achieve a fair, transparent, open and accountable market."

Read more: FCAinvestmentFinancial Conduct AuthorityUKasset managementChristopher Woolardfunds management
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