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Fund firms warned by Irish Bank on complex products

The Central Bank of Ireland has written to fund managers warning them to put a stop to “incomprehensible” investment schemes that consumers cannot understand.

Eurolife has revised the terms of its Income or Growth Plan II after the bank voiced concerns about the safety of this type of product.

The plan is now based on the performance of the 10 worst-performing stocks in a basket of 30 rather than the worst five from 20.

The bank, which regulates Dublin-based funds, became alarmed after it rejected a number of fund proposals which left investors open to risk.

The letter says: “The return on these investments is related entirely to assets and/ or other factors in which direct investment would not be permitted by the bank. Many documents put forward for review are so complex that they would not permit the average investor to make an informed judgement on the investment proposed. Some of these structures have the potential to bring the Irish fund industry into disrepute.”

Eurolife director Lynne Green says: “The bank did raise some concerns and we did change the product to meet their requirements. Part of the problem was that the prospectus was complicated but our consumer brochures have always been very clear.”

Central Bank of Ireland spokesman Neil Whoriskey says: “Some of the applications were incomprehensible. We want fund managers to think about the end-consumer and to make plans more transparent.”

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