View more on these topics

HSBC: FSA must force firms to tag ETFs that use derivatives

HSBC head of exchange traded funds Farley Thomas is calling on the FSA to force providers of swap-based ETFs to clearly identify which of their funds use derivatives.

In November, Hong Kong regulator the Securities and Futures Commission introduced a req-uirement for ETFs that use derivatives to have the marker X in their name. Thomas says a similar system should be implemented in the UK. He says: “We have had some investors who were not able tell if their investment is swap-based or not. It would be a good start for the UK to have a system similar to Hong Kong.”

Thomas says HSBC has no plans to launch a swap-based ETF. He says: ” Given all the questions over them, it would be prudent for us not to enter the market. Swap-based ETFs are not understood by investors, even people in the industry have difficulty understanding them.”

Last week, the Serious Fraud Office launched a review into how ETFs are marketed and if it has the capability to prosecute for wrongdoing in the industry.

In March 2010, the US’s Securities and Exchange Commission stopped approving swap-based ETFs while it conducts a review.

AWD Chase de Vere head of communications Patrick Connolly says: “In the UK, investors do not realise that different ETFs use different strategies and we are reluctant to invest in them because of that. Categorising swap-based ETFs in the label is a good start but asset managers need to spell out to advisers how different types of ETFs work.”

An FSA spokeswoman says: “We are concerned about whe-ther synthetic ETFs are suitable for retail investors and are looking at the issue.”



FSA fines two ex-A2O directors £42,000

The FSA has fined two former directors of Alpha to Omega (UK) a total of £42,000 for widespread compliance failings leading to the risk of unsuitable investment advice. A2O compliance director Andrew Ruff has been fined £28,000 and has been banned from performing any significant influence function, while managing director Richard Lindley has been fined […]

Architas looks at hedged shares for multi range

Architas is considering introducing funds with hedged share classes into its multi-manager range as concerns about the eurozone’s stability mount. The firm runs six multi-manager funds, totalling £478m, and does not currently use any funds with hedged share classes. Chief investment officer Caspar Rock says: “We have exposure to the euro through equities and we […]


Kensington doubles maximum loan size to £1m

Kensington has doubled its maximum loan size to £500,000 up to 90 per cent loan-to-value and to £1m up to 75 per cent LTV. In May, Kensington increased its maximum loan-to-value to 90 per cent and offered a limited tranche of lending through Legal & General Mortgage club. Before this, its maximum LTV was 85 […]


News and expert analysis straight to your inbox

Sign up


There is one comment at the moment, we would love to hear your opinion too.

  1. Tyburn Asset Management 15th July 2011 at 1:50 pm

    100% agree with you. Clear markers need to be placed to differentiate Physical and synthetic products. It should also be flagged that some retail investors are unwittingly getting involved in stock lending when all they are looking for a simply low cost passive investment product.

Leave a comment