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21 May 2014

FCA Calls For Transparency Of Fund Management Charges

The Financial Conduct Authority (FCA) has warned fund management firms that deliberately conceal information regarding charges and prevent investors from choosing the best investments not to engage in these practices. Results from a review conducted by the City regulator revealed that fund managers applied a number of different tactics to describe charges, which made it hard for investors to made objective comparisons.

In a press release published last week, the FCA stated that firms must clearly and consistently present their charges, so that investors have a full understanding of what they should pay. The review found that some firms included legal and administration fees, as well as audit, marketing and regulatory charges, while others did not. This rendered it effectively impossible for investors to compare charges.

As well as failing to provide investors with a figure reflecting all charges on their marketing documents or websites, some firms were also found to describe administration charges poorly, in a way that did not reflect the operation of the charge.

According to Clive Adamson, director of supervision at the FCA, the regulator did find examples of good practices when it came to transparency of information on different marketing documents. However, this transparency those should be applied consistently across firms, he added. The regulator firmly believes that investors need to understand and be able to compare charges covering all aspects of the market and the services provided, so the FCA is calling for fund management firms to adopt these practices of clarity and consistency, he explained.

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