Investments  

IMA creates outsourcing working group

The IMA has responded to criticism from regulators by creating a working group to focus on how firms that provide services to fund managers are paid.

The previous regulator, the FSA, wrote to fund management companies in December outlining concerns about how the failure of a service provider - such as an authorised corporate director or administrator - may impact on funds and end clients.

In response the IMA has drafted a white paper on outsourcing, including a list of “ideas” to improve monitoring of such services by fund managers themselves, as many service providers are not directly regulated by the FCA. The fund management trade body has stated its intention to create an industry standard for relationships and processes involving third party service providers.

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The white paper, written by Tamara Cizeika of law firm Eversheds’ financial services group, stated that the regulators’ focus on fund management outsourcing was part of a “broader change agenda to deal with the ‘too big to fail’ problem”.

“A number of asset managers have already started to review and action some of the key points highlighted in this paper, but the industry also awaits the outcome of the FCA’s analysis and work in this area,” Ms Cizeika wrote.

The white paper recommends 11 “ideas” for the industry to raise standards, including ensuring all fund managers have a “strong understanding” of the interactions between themselves and service providers. Other recommendations include putting in place business continuity arrangements and setting up “robust exit plans”.

Fund managers have been criticised in recent months about the payments they make to brokers for research, which sometimes blur the lines between paying for research and access to company management.