limited redemption fund and MULTIPLE share classes ON UNIT TRUSTS are UNDER CONSIDERAtion
Limited redemption funds, multiple share classes on unit trusts, more flexible rules concerning onshore property funds and the addition of performance fees are all areas the FSA will examine over the coming months.
The regulator is undergoing a complete overhaul of the collective investment scheme rule book and, as part of the review, is looking to allow flexibility on fund charges, providing groups with the ability to use performance fees.
Speaking at the IMA's annual conference, Kevin Tomlin, head of collective investment schemes at the FSA, told industry members current rules are more than 10 years old and offer little flexibility.
'If someone has a good idea for a fund, we usually say no unless it is covered by the source book, which is very limited,' he added.
As part of the overhaul, and to ensure compatibility with UK law, the FSA will work in conjunction with the Treasury as some trust laws may need to be rewritten.
The introduction of multiple unit classes on unit trusts is one area in which laws would need to be redressed, Tomlin noted.
The allowance of unit classes would level the playing field between Oeics and unit trusts, where an imbalance in terms of flexible structure has emerged over recent years.
The responsibilities of fund managers may also be lightened as part of the review. The regulator is looking at whether it is necessary to hold unit holder meetings when the investment objective of a fund changes, Tomlin said.
'The industry does not like them as they are so costly to hold and few ever show up,' he added.
The FSA is currently examining whether this area of the rules can be changed so the meetings do not have to be held, provided the manager and trustee of the fund take the view the investment change is in the interests of the investors.
The addition of non-Ucits funds, such as limited redemption, is another area the authority wants to explore. It is also considering a different form of regulation for funds sold exclusively to institutional and sophisticated investors. PricewaterhouseCoopers is in the process of examining the the issue on the FSA's behalf, Tomlin said.
'It is odd that if all the investors in a fund are institutional, they are given the same level of protection as retail investors,' he added. 'I'm not sure that is necessary.'
The FSA is also looking into why onshore property funds and geared futures and options portfolios have not been successful vehicles. The regulator could look to treat them differently as feedback has suggested liquidity issues have been the main barrier for take-up of onshore property vehicles.
A consultation paper on areas affected by the review is expected to be issued in March 2003.
Two global vehicles
'Further plug advice gap'
Must appoint separate CEOs and boards
Advisers do come out well
Will report to Mark Till