UK: FCA finalizes rules to boost asset manager competition

The UK financial markets regulator has finalised rules strengthening the duty of asset managers to act in the best interests of investors in their funds.

The rules are the first that the Financial Conduct Authority (FCA) has adopted following its landmark asset management market study. The study, published last year, found weak price competition among asset managers and led it to refer the investment consultant sector for a competition investigation.

The regulator dropped the term “value for money” from the rules requiring fund managers to justify to investors the charges they take from funds, following a consultation.

However, requirements published on April 5 today stated that fund charges should be assessed annually in the context of the overall value delivered.

The supervisor will also make it “easier for firms to switch investors to cheaper versions of the same fund,” Andrew Strange, a director at PricewaterhouseCoopers, said in an email. It’s an example “of the regulator helping firms deliver value,” he said.

The supervisor estimated in 2016 that about £109 billion (US$153 billion) was tied up in active funds that closely mirror market performance but charge higher fees than passive products. Some firms charged fees like active managers but operated like lower-cost passive funds, the FCA said last month. The firms paid £34 million (US$47.6 million) in compensation to investors in the funds.

Full Content: Bloomberg

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