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NCI: KIIDs are 'waste of time', let's create a code of practice
by Elsa Buchanan on Mar 12, 2014 at 07:00
The New City Initiative (NCI) has called for the creation of an industry code of practice.
The think-tank comprising private asset management companies said the framework could focus on principles of transparency and alignment.
This would include the ability to demonstrate firms are investing in their own funds, have suitable charging structures and levels of stewardship and are long-term investors. This would be coupled with accountability to clients, shareholders and government.
The NCI’s chairman, former Wealth Manager cover star Magnus Spence (pictured), explained the plan would be to provide a ‘stamp of approval’, which covers a set of values that are ‘more than the minimum prescribed by regulation’.
‘While there are more codes of practice around than hot dinners, we want one that means investors can be comfortable that what they are getting is valuable,’ he said. ‘Key Investor Information Documents (KIIDs) are a complete waste of time, and I don’t think they help investors at all.
‘But if you had on the KIID document a stamp of approval, which read ‘compliant with the NCI code of practice’, might that give investors additional comfort?’
Spence cited the difficulty to pin details down as a barrier to implementation, but told Wealth Manager a scoring system could help NCI members sign up to the framework.
‘They all like the principle but the challenge is in the detail and the way that you are aligned with the investor.
The code, which can be a statement of 10 principles that fits on one A4 piece of paper. [It] will have guidance notes that could explain each particular case and recognises that trading activity around positions needs to be a reflection of requirements of your individual clients, for example.’
He added: ‘A lot of people say that if you are a long term investor, you should have a low turnover – but if you are a small firm you need to be able to have shorter term trading to cut losses when prices fall.
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