Financial Conduct Authority
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FSA confirms Industry Guidance designed to help more efficient transfer of investment fund units

The Financial Services Authority (FSA) has confirmed Industry Guidance which will facilitate paper-free electronic transfer of ownership of units held in an authorised investment fund (an authorised unit trust or an open-ended investment company).

Investors who sell or transfer units they hold have until now been required to give the necessary authority in writing.  Government regulations and FSA rules which recently came into force allow fund managers to accept the unitholder’s authorisation by electronic means such as e-mail or through the internet site of the fund manager.  This is designed to permit more automated and efficient processing of unit transfers for investors, while providing adequate protection to the fund and to individual investors against fraud.  The Government estimates that these provisions could bring annual administrative savings for UK fund managers of between £70 million and £290 million.

The guidance issued by the Investment Management Association explains what fund managers should do to satisfy themselves that instructions given by electronic means are genuine.

Dan Waters, FSA director of retail policy & conduct risk, said:

“We are happy to confirm the IMA’s Industry Guidance which will help fund managers to make the move from the current cumbersome paper-based transfer system to electronic dealing and settlement without weakening protection for unitholders. Industry Guidance gives firms help and advice on ways of complying with FSA principles and high-level rules, in a way that allows flexibility and innovation.  The FSA will, where this is appropriate, use confirmation of Industry Guidance as an alternative to making additional Handbook rules.”

Notes for editors

  1. More information about the arrangements for FSA confirmation.
  2. The FSA’s framework for formal recognition of Industry Guidance came into effect in November 2007.  This allows trade associations and professional bodies in the financial services industry to seek formal FSA confirmation for guidance they generate to help their members understand and meet FSA regulatory requirements.
  3. Industry Guidance is defined by the FSA as: "Information created, developed and freely issued by a person or body, other than the FSA, which is intended to provide guidance from the body concerned to the industry about the provisions of our Handbook."  The FSA considers Industry Guidance to be information that is developed by the industry, not the FSA, and is to assist firms, their staff and their advisors in understanding how they can meet FSA requirements.” Confirmation of a piece of industry guidance lasts for a period of three years.
  4. The changes introducing electronic transfer of title were initiated by the Government and explained in HM Treasury’s paper, “Consultation on better regulation measures for the asset management sector”, published in May 2007.
  5. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
  6. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.

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