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IMA says FSA prospectus move adds complexity

The IMA says the FSA’s proposals on the EU simplified prospectus requirements are a missed opportunity to enh-ance consumer understanding of investment funds.

It is concerned that the regulator’s intention to implement the simplified prospectus alongside the existing key features requirements will add complexity rather than simplicity. It would also mean that the UK would set itself apart from what is supposed to be an integrated financial market service across Europe.

The IMA is particularly concerned about the FSA’s proposal to present investors with two methods of calcul-ating charges – reduction in yield and total expense ratio. It feels that the RIY is potentially misleading bec-ause of its use of an assumed yield of 6 per cent a year. The IMA would prefer the sole use of TERs, which it feels is a simpler and more straightforward standard.

The IMA believes that the proposals amount to gold-plating the European directive which the FSA said it would seek to avoid. By over-complicating the rules, the IMA says the FSA may prevent consumers getting a more user-friendly document.

Chief executive Richard Saunders says: “The IMA wants clear explanations for inves-tors of products and costs. This will not achieve that.”

FSA press officer Robin Gordon-Walker says: “We have seen the IMA’s response to our proposals and we will consider the points made before issuing a policy statement in the spring. We would like to synthesise all responses before then but we will not comment on individual submissions.”

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