We are reporting the findings of our thematic review that considered how firms ensure they manage funds and segregated mandates as they say they will. We also considered how firms monitor the appropriate distribution of their funds.
Why did we carry out this thematic review?
In our Business Plan 2015/16[1], we said we would be conducting a thematic review to assess whether UK authorised investment funds and segregated mandates are operated in line with investors’ expectations as set by marketing and disclosure material, and investment mandates. Investors make decisions on whether to invest in authorised investment funds based on marketing material, disclosure material and investment mandates so it is important that they are accurate and clear.
TR16/3: Meeting investors’ expectations[2] [PDF]
Who should read this?
Our findings will primarily be of interest to fund management firms. In addition, financial advisers and platform providers will find the review relevant to them. Consumer groups and trade bodies will also be interested in the themes explored in this report.
What do we want this report to achieve?
We want fund management firms to:
- ensure that product descriptions are clear and correct because investors and financial advisers decide whether to invest in authorised investment funds based on this information
- provide effective governance and oversight throughout the whole of a fund’s life, including funds that are no longer actively marketed
- identify trends that may indicate inappropriate sales by monitoring the distribution channels they select as part of their responsibilities as product providers
What are the next steps?
All fund management firms should consider the findings in this paper and review their arrangements accordingly. Distributors should consider their responsibilities in light of our findings.
Senior management and those involved in fund governance should consider whether any of the issues we raise in this report are reflected within their own firm’s operations and take any action necessary to minimise the risk of poor outcomes to customers.
We will shortly be writing to all the firms in our thematic sample to provide individual feedback. Where fund management firms did not effectively manage the risks that could lead to poor customer outcomes, we will require them to make improvements to their practices. For the most significant issues, we are already requiring them to be addressed.
We will follow up on this thematic review through our routine supervision work.
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