Simplified Prospectus will give fund investors clear information

The proposals set out requirements for a new document that will be known as the Simplified Prospectus. EU rules require this document to be offered to anyone who wants to invest in a collective investment scheme.

The FSA's proposals build on the existing UK approach to investment product information - the Key Features document by adding some new information requirements to meet EU standards.

These new information requirements include:

• a 'Total Expense Ratio' (TER) figure showing the costs and charges of the fund. The figure will not take account of front-end charges, exit costs or certain fund expenses such as dealing costs.

• a 'Portfolio Turnover Rate' (PTR) figure, to reflect the volume of dealing within the fund; and

• the historic performance of each UCITS showing up to ten years' annual returns.

Dan Waters, FSA Director Retail Policy and Asset Management Sector Leader, said:

"The Simplified Prospectus is the final building block of our implementation of the Third UCITS Directive. The EU rules provide a common set of content requirements that will ensure that consumers get consistent information about funds bought from any EU state. But we also want to make sure that prospectuses are clear and readily understandable for consumers.

"So we propose to retain our existing approach to providing customer-friendly product information for example, we ask firms to use a 'Question and Answer' format to set out the information required, because we know from research that consumers find this style of presentation particularly helpful."

The consultation will close on 28 January 2005 and the FSA expects to make the new rules to come into force on 1 March 2005 with a transitional period until September 2005.

Notes for editors

1. Comments on CP 04/18 Implementation of the Simplified Prospectus requirements in the UCITS Management Company Directive are sought by 28 January 2005.

2. The UCITS Directive was adopted by the EU in 2002. Among other provisions it contains product information provisions that require UCITS managers to publish and offer their customers a Simplified Prospectus.

3. UCITS are Undertakings for Collective Investments in Transferable Securities and Open Ended Investment Companies.

4. 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.

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