| UK unfair trading practices no reason for worries |
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| 18/04/2004 | |
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On the unfair trading practices ground, UK asset managers are fairly similar to their European counterparts. According to the report released by the Financial Service Authority (FSA), there is no evidence of late trading in the UK financial markets, although some evidences of market timing in UK authorised collective investment schemes have been observed by the financial regulator. Likewise, the FEFSI, the European federation of investment funds which represents 900 asset management companies, had previously released information as to the absence of systematic illegal practices among its members. In France, albeit no case of fraudulent activities has been reported up to that point, an investigation was launched into the illegal practices in November 2003. French asset managers had until January 2004 to fill out the questionnaire and a report on the results is due next Summer. Out of the 9,620 transactions reviewed by the FSA, only 118 led to an in-depth investigation by the regulator, and eventually demonstrated that for most occurences of market timing, the asset manager took swift action to end the practice. In the end, it is currently estimated that less than £5 million have been affected by those circumscribed practices. This sum, which is currently being calculated, could eventually be used as the basis for compensating payments to be made to the defrauded funds in some specific instances that are not detailed by the FSA. Moreover, where cases of market timing have been identified, the nature of the activity has not been as in the United States, where fund managers are said to have shared the financial benefits of the practices with the clients at the expense of long term investors. Industry solution Overall, the picture drawn by the FSA is thus rather positive. "The picture we have uncovered is generally quite an encouraging one. Although there is evidence of market timing having occurred within our authorised funds, looking at all the evidence we have amassed, we can find no sign either that market timing is widespread or that it has been a major source of detiment to long term investors", said Michael Foot, FSA Managing Director. For the time being, the FSA does not favour further regulation to deal with the issue of market timing. "We believe that our Principles and Rules provide sufficient tools to enable firms to manage the conflicts of interests posed by market timers", said the FSA in a statement. Further to that, the FSA confirms that in accordance with its Consultation Paper 185 on the reforms fund regulation in the UK published last year, it will still look into measures available to deter market timing, which includes the widely used practice among continental European asset managers of fair value pricing, which consists in ensuring that acquisition and redemption orders are not accepted after the time at which fund units/shares are priced. This e-mail address is being protected from spam bots, you need JavaScript enabled to view it |
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