The FSA says it needs more time to study the issue of single-pricing regimes currently applied to ope...
The conclusion is contained in the regulator's discussion paper released on Tuesday, which arose out of the need to address the issue of dealing costs and how those costs should be allocated between different investors within funds.
Oeics are currently forced to operate a single-pricing system, in which managers apply a mid-market valuation to a fund's assets irrespective of dealing costs, fiscal duties or charges, but which allows them to recoup these costs by applying a levy on sales or redemptions of units in the funds.
The levies are permitted in order to combat dilution, or the undermining of value represented by the assets underlying funds when those assets are traded, ie., shares or units are dealt.
The FSA said that most of its study of the issue so far had focused on the effects of the single-pricing regime involving Oeics rather than on the possible effects such as regime could have on unit trusts.
However, even this limited study has led the regulator to draw up a list of points it feels the financial services community should consider.
The FSA said that single-pricing helped avoid confusion for consumers, and could deliver transparency about dealer costs, two important reasons for pushing for pricing reform.
That said, it added there were four options for the industry to consider.
The existing system could be left to continue as is.
A prescriptive approach could be applied, with the FSA either prohibiting dilution levies or requiring levies where dilution was significant.
A minimalist approach could be applied, leaving the issue of compensation for dilution to be subject to disclosure, as is the case in certain other countries.
Or finally, a swinging price approach could be followed, in which some flexibility would be encouraged for prices to swing above or below the mid-market price of assets.
The FSA favours this last approach as it would allow managers to adjust prices to take account of the effects of dilution - effectivly using pricing flexibility to cancel out the effects of dilution altogether.
In relation to applying a single-pricing regime to unit trusts, the FSA said it had not picked a deadline for making such a decision, but would try to release a consultation paper on the issue by mid-2002.
To that end, it is looking for further submissions by 31 December this year in order to meet that goal.
The full discussion paper is available at the FSA's website at the following address: http://www.fsa.gov.uk/news/
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