Investment Association: Keep to the code 28 March 2017London Reporter: Mark Dugdale
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A UK asset management-backed industry code to standardise disclosure for charges and transaction costs has recommended specific treatment for securities lending to meet national and European regulatory requirements.
The Investment Association launched a public consultation on the standardisation of disclosure for charges and transaction costs on 27 March.
Its code “provides a blueprint for the reporting of charges and transaction costs using a consistent approach across the market and in line with regulatory requirements”, including those set down in the Packaged Retail and Insurance-based Investment Products Regulation, second Markets in Financial Instruments Directive and the UK’s final rules for disclosure in workplace pensions, known as FCA CP16/30.
Under the proposed code, any earnings from securities lending that are not paid to a unit-linked fund should be treated as a cost and disclosed as such, as should any other payments to agent lenders.
“The disclosure should enable the client to understand the total revenue generated and the proportion of the total they actually receive. The beneficiaries of the revenue sharing arrangements should be identified.”
“Where lending arrangements exist between the client and custodian with no involvement of the manager, any reporting should be provided to the client directly by the custodian without involving the manager.”
Jonathan Lipkin, director of public policy at the Investment Association, said: “The new code provides for the first time a common framework for enhanced disclosure across investment products and services. It is a major opportunity to consistently define and provide data on charges and transaction costs.”
He added: "The Investment Association would like to work with the FCA to seek regulatory recognition for the new Code in the Financial Conduct Authority’s Conduct of Business Sourcebook.”
"This consultation is designed to encourage feedback from industry, consumer, government and regulatory bodies on the proposed approach ahead of the code’s final implementation and we welcome views from all stakeholders."
The closing date for consultation responses is 19 May. A final set of proposals will be published in Q3 2017.
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