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FSA set to relent on trust crossholdings

FSA managing director John Tiner appears to have conceded that proposals to limit investment-trust crossholdings to 10 per cent would be a severe blow to fund of funds business.

Speaking at a breakfast briefing in London last week, Tiner said the FSA is aware of industry concerns that the proposals, published in CP164 in January, could spell the end for investment trust funds of funds.

He said the challenge for the FSA is to find a way round this, a remark interpreted by many to mean the regulator has conceded the point and will abandon the proposal.

Tiner also referred to the “awesome” weight of consultation being conducted by the FSA, saying the regulator has no choice in much of what it does.

He said he thinks the industry prefers to be asked its opinion rather than for the FSA to “sit in our ivory tower and just make things up and not talk to anyone”.

He was challenged by Association of Private Client Investment Managers and Stockbrokers chief executive Angela Knight to drop some of the “nice to have” changes and focus on mandatory ones.

Tiner said: “There is the 10 per cent investment limit which many would feel would kill off all funds of funds. This is not our objective and we need to find a way to work around that.”

AITC communications director Annabel Brodie-Smith says: “The problem with the 10 per cent rule is it would severely affect legitimate fund of funds business, which cannot be the FSA&#39s objective as they provide a desirable way for people to diversify their portfolios.”

Iimia head of investment trusts Nick Greenwood says: “It would seem to make sense to adopt the approach put forward by the industry which would set the limit of 10 per cent investment in trusts which themselves invest more than 20 per cent in investment trusts.”

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