Compliance
UK Regulator Delivers $47 Million Blow To Asset Management Sector

The UK's Financial Conduct Authority has unearthed over 60 funds that allegedly overcharged investors for active management when, in fact, they merely tracked benchmark indexes.
The UK’s financial watchdog has ordered asset managers to repay
£34 million ($47 million) to investors they overcharged for
so-called “closet tracker” funds.
The Financial
Conduct Authority (FCA) reviewed whether some funds charged
higher fees for active management or selecting stocks, which in
reality just tracked or partly tracked a benchmark
index.
Megan Butler, the FCA’s executive director for investments, said
the watchdog looked at 84 “potential closet tracking” funds, with
64 failing to spell out clearly enough how “constrained” they
were in choosing what to invest in.
Only 20 of the 84 funds adequately explained to investors how
they were managed, Butler told the UK’s Daily
Telegraph.
One asset manager is facing a further investigation that could
potentially lead to sanctions, she said, without disclosing the
fund’s name or further details.
The push for transparency follows a wider review last year by the
regulator last year which found that, overall, the UK’s fund
management sector lacked transparency, value for money and
competitiveness. The FCA is expected to publish its “remedies” or
actions it will take based on the review’s findings.
“We expect fund managers to take their duty to their consumers
seriously. They should manage their funds the way consumers
expect them to and tell consumers what they are doing,” Butler
said. “That is why clear promotional material for investment
funds is a priority for us. When we’re aware that firms haven’t
been clear, we have a range of powers that allow us to intervene
to protect consumers.”