A financial adviser has reported Legal & General to the FSA over claims it misrepresented the past performance of its £2bn High Income trust by smoothing out price movements.
The complaint stems from L&G's decision to restate the past performance of the fund - which is open to institutional investors - after altering its pricing structure.
Last June, the fund moved from a 'single swinging' to a 'dual price' basis.
On the single price basis, all transactions on a given day were at one of two prices - either the offer (buying) price or bid (selling) price, depending on whether there was a net inflow or outflow on that particular day.
This meant a possible daily swing of up to 5% in the unit price as it switched from a bid to an offer basis.
Under the dual pricing structure, units are bought at the offer price and sold at the bid price, reducing the day-to-day price volatility.
After changing the pricing basis, L&G restated the fund's performance on past performance systems based on the dual price basis, reducing price fluctuations.
Charts on independent performance systems therefore show the fund's past performance as it would have been under the current pricing system rather than reflecting the price at which units were bought and sold at the time.
The IFA, who wished to remain anonymous, said: "L&G's past performance figures neatly 'iron' these fluctuations out, showing them higher up in performance tables than they should be.
"This is in my view disgraceful for what is a £2bn fund."
A spokesperson for L&G said: "This goes back to the move to full dual pricing we made last year when our pricing history showed volatility which wasn't actually representative of what was going on in the fund (it was down to us changing the pricing on a day-to-day basis).
"Essentially it depended on whether money was coming into or out of the fund and had nothing to do with the performance of the fund or its underlying assets.
"We have restated prior data (ie. before June 2010) on a bid basis. This is so that a like-for-like comparison can be made by anyone looking up the fund. If we hadn't done this, potentially you could be comparing bid and offer prices.
"So the current pricing history now shows the actual volatility of the fund and a proper measure and comparison can be made with historic data. This was done after contacting the performance team at the IMA."
Professional Pensions, IFAonline's sister title, understands the FSA's Unfair Contract Terms team will not be taking any action over the complaint, but has brought the matter to the attention of the team which supervises L&G.
The FSA said it could not comment on individual companies or complaints.
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