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Natalie Holt
Regulator poised to take tough line on ETN trading by DFMs
Gilchrist: ‘DFMs may find the FSA breathing down their neck’
The FSA is set to clamp down on discretionary fund managers who buy exchange traded notes and invest in commodities without their clients’ permission, says Churchill Investments director Chris Gilchrist.
In a presentation on ETFs at the Personal Finance Society annual conference in Coventry last week, Gilchrist said he expected to see the regulator scrutinise the actions of discretionary fund managers more closely, particularly where ETNs were concerned.
He said: “I think discretionary fund managers who are buying ETNs and investing in commodities who have not got a mandate from their client to buy commodities may find the FSA breathing down their neck at some point. I hope they do. I think regulatory intervention is certain, not likely. Disclosure is poor and certainly this needs regulatory intervention.”
Gilchrist also warned that advisers should be wary of dealing with exchange traded funds, even though they do not have the credit risk associated with ETNs.
He said: “Are you really capable of being a strategic bond fund manager? If you are, my advice would be to go off and get a job with Legal & General. Do not pretend you can do that as an adviser. I think you have to recognise your own limits on where it makes sense to use ETFs in a private client portfolio.”
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