IMA criticises CPS proposal to curb fund categorising role
The IMA has hit back at proposals from the Centre for Policy Studies (CPS) that would strip it of its ability to categorise funds into sectors.
A draft paper from the CPS, currently being reviewed by members of the House of Lords and obtained by Investment Adviser’s sister website FTAdviser.com, calls for the IMA to “cease its involvement” in what it describes as the “labelling” of funds within its sectors.
The criticism follows the FSA’s announcement last week of a £110m consumer redress scheme for Arch Cru investors. FSA director of supervision Clive Adamson said some advisers had relied too heavily on the placement of two Arch Cru funds in the IMA’s Cautious Managed sector, now known as Mixed Investment 20-60 per cent Shares.
But Jane Lowe, director of markets at the IMA, said the CPS paper “overstated” the function of the IMA sectors.
“The CPS doesn’t quite understand what the sectors are all about,” Ms Lowe said. “They don’t indicate whether you should buy funds – it is up to the individual or the adviser.”
The CPS also attacked the IMA for assuming a “quasi-regulatory role” in classifying funds, but Ms Lowe said the trade body had “always accepted” its role was one of self-regulation.
“The fund houses elect which sector each fund goes into and we monitor what is going on in the fund to ensure it meets the definition,” she said.
Dennis Hall, managing director at Yellowtail Financial Planning, said advisers were unlikely to benefit from the FSA assuming responsibility for fund classification, adding that it would instead increase regulatory costs.
James Norton, director at Evolve Financial Planning, said: “There is no reason why the FSA would do any better. What is really important is that the underlying investor needs to understand what the risks are.”
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