FSA/PN/137/2001
23/10/2001

The FSA has today published a discussion paper setting out options for a simpler, more practical, single pricing system for unit trusts and open-ended investment companies. The aim is to identify the scope for practical changes which would allow firms to allocate dealing costs more fairly between investors.

An FSA review of the current system found it could result in consumer mis-understanding and confusion as to why fund managers charge different dealing costs to the investor when they are buying and selling units in the fund.

A number of options for improving the current system are being considered, ranging from minimal to highly prescriptive rules. One potentially promising solution, that could deliver a simpler and fairer system for consumers, is to allow the use of a single price that could include the dealing costs. While the dealing costs would be included in the price, management charges would continue to be quoted separately.

Kevin Tomlin, Head of FSAs Collective Schemes Department, said:

We have found that investors prefer a single price when buying and selling units but they can be confused by the associated dealing costs under the existing single pricing system. This tends to lead firms to allocate these costs to the fund rather than to the investor who is buying or selling units. An alternative system could offer a better practical balance between fairness, transparency and consumer understanding.
The FSA is seeking preliminary comments on these options by the end of the year. The aim then is to put forward firm proposals for consultation early in 2002.

Notes for editors

  1. Currently, single pricing is required for authorised open ended investment companies (OEICS), but it is optional for unit trusts. The review has therefore been largely about experience of single pricing in OEICS.

  2. A related issue is that of requiring unit trusts to adopt single pricing. The FSA is not taking a view on fixing a deadline for that at this stage. Further work would need to take account of experience with any new system of single pricing. The FSA will comment further on this in its Consultation Paper due in early 2002.

  3. 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; the protection of consumers; and fighting financial crime.

  4. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.

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