View the article online at http://citywire.co.uk/new-model-adviser/article/a646207
FSA: relying on IMA sectors over Cru not enough
by William Robins on Dec 17, 2012 at 16:05
The Financial Services Authority (FSA) has launched a scathing attack on IFAs’ due diligence on the Arch Cru funds, claiming it was not enough to rely on their Investment Management Association (IMA) sector classifications.
The FSA said the majority of responses it received to its Arch Cru redress scheme, to be funded by advisers found to have mis-sold the funds, were opposed to it. The regulator added a number of responses had pointed to IMA sector classifications as justifications for selling the funds as low-risk investments.
The flagship Arch Cru fund, the Arch Cru Investment Portfolio, sat in the IMA Cautious Managed sector, now renamed the Mixed Investment 20-60% Shares sector.
The regulator said: ‘Advisers cannot rely on an IMA sector classification as an indicator of the risk of a particular fund. Advisers should, as part of their due diligence, look at the kind of assets the fund manager intends to invest in, and the investment strategy.’
Some respondents also pointed to literature accompanying the funds which portrayed them as low-risk investments. But the FSA said IFAs should have realised that:
- the marketing material provided was limited;
- claims in the marketing material about the overall risk consumers were taking was low or medium were not consistent with the investment strategy and the funds’ underlying assets;
- the funds were exposed to asset classes including unlisted debt and equity.
News sponsored by:
Click here to watch a series of sponsored interviews with Jupiter's fund managers on the UK equity market.
Today's top headlines
More about this article:
More from us
- IMA has Managed away the problem of sector classification
- FSA pushes forward with Arch Cru redress plans