IMA Responds to NewCoB Proposals from FSA
The Investment Management association (IMA) today (29 November, 2006) issued its comments on the wholesale reform of the Conduct of Business (CoB) rules proposed by the FSA in response to the MiFID Directive. In a substantial and detailed response to the FSA's consultation paper CP06/19, the IMA covers a wide range of issues, but two are of particular importance.
- First, there is welcome confirmation that the MiFID rules will, in future, form the basis of requirements on the sale of funds to retail investors. This means that certain aspects of the "packaged product" regime, such as "reduction in yield" calculations and projections of returns, which are inappropriate to funds, will be abandoned. But the IMA goes further and calls for the removal of funds altogether from this regime.
- Second, IMA expresses specific concerns about the treatment of investment managers in dealer markets such as the fixed interest and over-the-counter derivatives markets. The issue is whether managers have, in all circumstances, "client" status and hence benefit from the protections set out in MiFID, such as those requiring a dealer to manage his conflicts of interest. With regard to best execution, investment managers should be entitled to choose the level of protection that they need to protect their clients' interests. IMA argues that exercising this choice should not determine whether a client relationship exists between an investment manager and a dealer.
Richard Saunders, Chief Executive of the IMA commented,
"The implementation of MiFID is a major undertaking and there is much here for us to welcome. But we believe there is more work yet to be done in certain areas. The packaged product regime has outlived its usefulness and should no longer apply to funds. We consider that, by not giving investment managers full client status in dealer markets, not only would the interests of investment managers' clients be jeopardised, but the proposed rules would also have failed to implement MiFID properly. We call upon the FSA to reconsider both these areas."
IMA's response to CP06/19 is attached .