Unit trust and OEIC regulations have been updated by the FSA to allow a new form of lower risk "limi...
Unit trust and OEIC regulations have been updated by the FSA to allow a new form of lower risk "limited issue" and "guaranteed" products.
Several changes have been made to open the range of products available in the market, and could tie in with the government's drive to introduce stakeholder suite investment products, as proposed by Ron Sandler.
Protecting investors' assets against market falls seems to be the main element of these changes to collective investment schemes regulation, however, the range of funds that qualify for an EU passport has also been extended to include higher risk investments such as derivatives.
"Limited issue" products act much in the same way as existing unit trusts but carry a limit or cap on the number of units - whereas previous rules required units to remain open-ended - in the hope providers can then offer better levels of protection from stock market falls, says the FSA.
Likewise, funds will be allowed to imply a degree of capital security or "guarantee" a return providing using those terms are transparent and do not mislead investors.
There are already products in the UK market which appear to offer some sort of guaranteed or protection but until now have been unable to use these. Guaranteed funds will, however, only be allowed to use such terms if there is a separate full money-back guarantee.
Extension of the EU passport to investment funds is partly the result of the European Directive on UCITS, which is designed to encourage greater diversification of funds from shares and bonds, as new funds can include derivatives, deposits and fund of funds.
Any fund which adopts some of these new rules will have to specify their investment policies and any guarantees or limits on issue.
Details of the changes, which are available in a 141-page FSA document, can be accessed by clicking thru the right-hand link.
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