FSA to introduce new rules for investment companies
14/11/2002
The Financial Services Authority will introduce changes to the Listing Rules governing the interests of investors in investment companies (including investment trusts), FSA chairman Howard Davies told the Treasury Select Committee today (November 14th). The following changes are being put forward:
1. Greater clarity in respect of
investment policy to be followed
gearing (borrowings)
risks and how they will be mitigated
corporate governance
2. A limit on the percentage of total assets that can be invested in other funds.
3. Increased safeguards relating to investment companies which employ investment managers including
investment managers to be appointed annually with that appointment to be ratified by shareholders
new rules governing the independence of investment managers from investment company boards
limits on any severance arrangements included within investment management agreements
4. A new rule requiring that shareholders must approve any material change in investment policy (at present shareholders have to approve a change only in the first three years).
5. The introduction of a further requirement for appropriate risk warnings to be included in a prominent place in any prospectus or listing particulars, in language that investors will clearly understand, together with rules enhancing disclosure of factors affecting the risks faced by an investment company, to be placed within the body of a prospectus.
The FSA will also enhance the disclosure requirements to retail investors of the risks associated with investing in the shares of investment companies.
It will consult on the above-proposed measures and in doing so will have regard to such issues as transitional arrangements, and the particular position of funds of funds.
Notes for editors
The FSA will consult on these changes to the listing rules early 2003.
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 of consumers; and fighting financial crime.
The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.