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IMA seeks reassurance over FOS rulings on risk ratings

The IMA is seeking clarification from the Financial Ombudsman Service over rulings which some fund managers fear oblige them to categorise all equity funds as high risk.

The IMA says it is concerned by suggestions from several of its members that recent rulings against them on risk ratings could have huge implications for all firms with equity funds.

They believe the FOS is effectively forcing them to classify equity funds as high risk in marketing literature, whether or not they are considered to be core holdings.

But the FOS denies it has made such demands, arguing that it has only upheld individual complaints from investors where they were sold funds which did not match their risk profiles. The FOS says it has neither the power nor the inclination to make blanket statements branding all equity funds as high risk.

FOS head of communications David Cresswell believes the problem may be that fund managers often view FOS rulings as defining statements which have wider ramifications than is actually the case. But he says he is pleased that firms are taking on board lessons from FOS rulings, which only relate to individual cases except in instances of product debacles, such as with split caps.

Cresswell says: “Big banks are more comfortable with our process than fund managers, where chief executives often become involved in decisions on cases.

“For us, it is more a question of informal guidance that may percolate down out of a particular case.”

IMA chief executive Dick Saunders says: “If there was a suggestion that equities are always high risk, then we would have a problem as there are clearly higher-risk products out there. But it is encouraging to hear the FOS making these comments.”


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Auto-enrolment: pay attention or pay the price

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