UK’s FSA takes issue with misselling and market timing

The investment management industry in the UK is under fire from the Financial Services Authority (FSA) on a number of fronts at the moment. First, the market-timing abuses that have grabbed headlines in the US also seem to have occurred in the UK, according to the regulator. Results of the FSA’s investigations are expected at the end of January. The regulator has also just published a new set of rules that outline how firms may advertise their past performance -- the regulator has long been concerned that funds fudge their results to make themselves appear to be better performers than they actually are. And, on top of all of this, now funds are being asked by the regulator to review the way their products are priced. This all heats a boiling cauldron of potential reputational, legal, and regulatory risk for mutual fund firms in the UK, say industry officials.

Indeed, the mood in the UK very much reflects the climate in the US, where NewYork Attorney General Eliot Spitzer is aggressively pursuing mutual fund companiesin all of these areas as well. The FSA’s approach, say industry sources,is somewhat less hostile than that of the US regulators, but regulators are saidto be determined to sort out the industry’s problems as quickly as possible.

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