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FCA moots new rules for fund objectives

FCA building FCA feesThe FCA has published a further consultation on how information on funds can be made clearer.

In a highly anticipated policy statement published today, the FCA has set out the next steps to solve some key concerns it found within the investment industry following a widespread sector review.

In July, the FCA released the findings of the interim report into the sector which highlighted weak price competition in various areas of the investment industry, including “the evidence of sustained high profits” for firms over many years and a lack of clarity around funds’ objectives.

In a further consultation launched today, the FCA has asked fund groups to provide feedback on how they can improve the way they communicate fund objectives to clients.

While the regulator has not suggested a drastic overhaul of marketing material, it proposes that fund objectives should be set out in plain English to make them more useful to investors.

It also proposes new rules to force managers to shed clarity on when a fund is benchmark-constrained, when a fund’s holdings differ from the index and how to disclose information when a fund uses one or more benchmarks.

The FCA says fund managers “rarely” explain why or how they are using particular

A working group to review how funds compare to each other and solve the opacity of information was set up by the FCA after its report last year.

The regulator also intends to make new rules so that in case of a lack of benchmarks for funds, asset managers should give investors an indication of how should they assess performance.

It is also consulting on changing rules around performance fees, suggesting these will have to be calculated net of other fees “in all cases”.

The consultation is open until 5 July.


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