FSA confirms Industry Guidance designed to help more efficient transfer of investment fund units

The Financial Services Authority (FSA) has confirmed Industry Guidance which will facilitate paper-free electronic transfer of ownership of units held in an authorised investment fund (an authorised unit trust or an open-ended investment company).

Investors who sell or transfer units they hold have until now been required to give the necessary authority in writing. Government regulations and FSA rules which recently came into force allow fund managers to accept the unitholder’s authorisation by electronic means such as e-mail or through the internet site of the fund manager. This is designed to permit more automated and efficient processing of unit transfers for investors, while providing adequate protection to the fund and to individual investors against fraud. The Government estimates that these provisions could bring annual administrative savings for UK fund managers of between £70 million and £290 million.

The guidance issued by the Investment Management Association explains what fund managers should do to satisfy themselves that instructions given by electronic means are genuine.

Dan Waters, FSA director of retail policy & conduct risk, said:

“We are happy to confirm the IMA’s Industry Guidance which will help fund managers to make the move from the current cumbersome paper-based transfer system to electronic dealing and settlement without weakening protection for unitholders. Industry Guidance gives firms help and advice on ways of complying with FSA principles and high-level rules, in a way that allows flexibility and innovation. The FSA will, where this is appropriate, use confirmation of Industry Guidance as an alternative to making additional Handbook rules.”