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News: FSA outlines fund disclosures for consumers

City watchdog, the FSA (Financial Services Authority), has published a consultation paper - 'Bundled Brokerage and Soft Commissions Arrangements for Retail Investment Funds' - which addresses the issue of how to ensure that investors in retail funds benefit from the enhanced disclosure regime being introduced (for firms) for bundled brokerage and soft commissions from January 1st 2006.

The overall objective of the FSA's new regime is that investment managers should achieve value for money for any expenditure that is charged through to their customers' portfolios. The aim is to achieve this through increased transparency and accountability by disclosing this expenditure to clients, thereby subjecting the manager to competitive pressure to ensure clients receive best value.

Recognising that consumers will have little interest in physically receiving this detailed information the watchdog is proposing that an individual or body should act as a representative of retail investors who will consider the new disclosures on their behalf and interact with the manager where necessary.

Any representative will need to have an appropriate degree of expertise, authority and independence. And so the watchdog has made proposals for who would be suitable to carry out this role for each type of fund:

For collective investment schemes (CIS), for example, it should be the depositary or trustee.

For with-profits funds, on the other hand, it should be the committee or person appointed to review compliance with the Principles and Practices of Financial Management.

Meanwhile, for investment trusts, the directors of the company - in particular those who are independent of the investment manager - will be called upon.

Finally, for unit-linked funds, it should be either the with-profits committee if the company has one, or the appointed actuary, or the independent directors of the company.

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