SCM praises enhanced transparency in new EU ETFs rules
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In focus: Regulating Exchange-Traded Funds
SCM Private has said it welcomes recent guidelines from the European Securities and Markets Authority on exchange traded funds and Ucits (undertakings for collective investment in transferable securities) funds, stating the guidelines will enforce greatly improved transparency.
The new guidelines, which are expected to come into force next year, enshrine much of the goals of the True and Fair Campaign, which is backed by SCM and is demanding improved disclosure over fees from fund managers, according to the wealth manager.
The guidelines set out basic information that should be given to investors about Ucits and ETFs, but go further by forcing ETF providers to return any profits made from securities lending to the investor.
They will also allow investors to know the level of exposure, the names of counterparties, and types of securities used in synthetic replication models, and will force firms to provide details on the amount of collateral in Ucits-compliant funds.
Alan Miller, founder of SCM Private, said: "In a single stoke Esma has achieved what UK regulators and trade bodies have studiously ignored for years.
"The practise of stock lending whereby investment managers keep the profits make from potentially lucrative securities lending whilst the risks were frequently borne by investors is simply unacceptable.
"SCM Private is not against conservative securities lending without the previous inherent conflicts of interest as it can significantly drive down the cost of investment, thereby benefitting consumers.
"In fact the True and Fair Code allows such income to be set off against other costs, in order to provide consumers with a fairer guide to the net costs of their investments."