Your IndustryApr 24 2014

Regulation of UK Equity Income funds

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UK Equity Income funds are authorised and regulated by the Financial Conduct Authority.

Most are ‘Ucits’ (Undertakings for Collective Investment in Transferable Securities) schemes as defined under the European framework, according to Mr Holloway, and are therefore authorised under Section 243 of the Financial Services and Markets Act 2000.

Darius McDermott, managing director of Chelsea Financial Services, says UK Equity Income funds must also conform to the IMA sector definition:

“Funds which invest at least 80 per cent in UK equities and which intend to achieve a historic yield on the distributable income in excess of 110 per cent of the FTSE All Share yield at the fund’s year end.”

The income element of this definition has proved a problem for certain funds in the past, according to Mr McDermott, particularly those who target capital growth more than income.

If a fund does not conform with this definition over a certain period of time, Mr McDermott points out the IMA can put the fund in a different sector.