The FCA has unveiled new rules which force fund managers to ensure value for for investors.

The plan was revealed in the authority’s latest step in its response to concerns raised by its asset management market study.

It forms part of a package of remedies to ensure fund managers compete on the value they deliver.

Today’s publications include:

• Final rules following a previous consultation, focused on the duties of fund managers as the agents of investors in their funds

• A consultation on proposed rules and guidance, focused on improving the information that investors get about funds

The documents address fears outlined in the FCA’s June 2017 final report of the asset management market study and were described as: “An important part of a wider package to improve competition in this industry for consumers.”

The final rules and guidance cover:

• a requirement for fund managers to make an annual assessment of value, as part of their duty to act in the best interests of the investors in their funds

• a requirement for fund managers to appoint a minimum of two independent directors to their boards

• the introduction of a new prescribed responsibility under the Senior Managers and Certification Regime to bring individual focus and accountability

• technical changes to (i) improve fairness  around the way in which fund managers profit from investors buying and selling their funds and (ii) facilitate the movement of
investors into cheaper share classes

To address its concerns that even actively engaged investors do not find it easy to choose which fund is right for them, the FCA published a further consultation on remedies related to funds providing better information about what they are offering.

This included proposals on:

• how fund objectives can be expressed more clearly and be more useful to investors

• making it clearer when funds are benchmark-constrained, or limited in how far their holdings can differ from the weightings of a benchmark index

• ensuring that where a fund uses one or more benchmarks, this is disclosed consistently and explained to investors

The FCA has also released an Occasional Paper setting out the results of behavioural research which looked at how different ways of presenting information about charges affected  investors’ decision-making and their understanding and awareness of charges.

Christopher Woolard, executive director of strategy and competition at the FCA, said: “The investment choices open to people, and the decisions they make on how to invest, can have a profound impact on their financial health.

“They can also have consequences for their families, as well as society as a whole.

“That’s why it is important the asset management industry, which looks after the savings of millions of investors, is working as well as possible.

“But our market study found evidence of weak price competition in a number of areas.

“Today’s announcements are an important part of a package of measures that, combined, aim to achieve a fair, transparent, open and accountable market.”

Firms have 18 months to implement the rules on assessment of value and appointment of independent directors, and 12 months for the rules related to the way in which fund managers profit from investors buying and selling their funds.