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28 June 2012
The Investment Management Association (IMA) has today issued a consultation paper to its members outlining proposed industry guidance on enhanced disclosure of fund charges and transaction costs incurred by UK-authorised funds.
The guidance comes following detailed discussion by a working group representing over 50% of retail funds under management.
The IMA recommends additional information - above and beyond the current European regulatory requirements - to be made easily available to investors via fund managers' websites for each of their funds:
Enhanced disclosure of transaction costs by providing three year average figures for broker commissions and transfer taxes (e.g. stamp duty) as a percentage of the fund's net asset value. Information on the significance of these costs and the bid-offer spread should also be provided.
Ongoing charge always to be disclosed instead of the annual management charge (AMC) as this provides the most comprehensive picture of the charges being deducted from the fund, and is in line with the new Key Investor Information Document (KIID). Where the AMC is stated, the ongoing charge should be given equal prominence.
Clearer explanations on the purpose of all charges and costs: entry, exit, ongoing, performance and transaction through separate disclosure notes – recommended wording is provided.
Richard Saunders, chief executive of IMA, said:
"While we believe that fund charges are already fully transparent, our proposals aim to provide end investors with improved and consistent explanations of costs and charges. They also tackle the difficulty of disclosing transaction costs which impact investors in much more complex ways than charges. There is no evidence that they act as a drain on investor returns, but investors have every right to know the levels of transaction costs being incurred by their funds. The challenge for the industry is to provide helpful and meaningful information.
"We now seek feedback from the IMA membership at large, following which the final version of the guidance will be issued."
The guidance applies on a voluntary basis, in addition to existing mandatory European regulatory requirements.
However, it cannot alter or add to the disclosures that must be made in the new Key Investor Information Document (KIID), which all UCITS must provide by 30 June 2012.
The deadline for members to respond is Friday 3 August.
The full consultation paper on 'Enhanced disclosure of fund charges and costs' is available here: