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05 May 2011

IMA: Product intervention not the only tool in the box


Responding to the FSA Discussion Paper on product intervention, the IMA has cautioned that measures designed to tackle market failure should not be seen as a substitute either for effective supervision of distribution or applying sanctions to mis-selling.

IMA welcomes the FSA’s willingness to adopt a variety of measures to deal with market failure, and recognises that product intervention is one such measure. Critically, however, the proposals in the paper would not prevent mis-selling of products based offshore – the promotion by Keydata of Lifemark and SLS bonds issued offshore being a case in point. There is also a need to factor in European developments and avoid putting UK firms at a competitive disadvantage to their European counterparts by imposing additional layers of regulation.

Julie Patterson, Director of Authorised Funds and Tax at the IMA comments:

“When introducing new measures, the FSA ought to take into account what is already happening to avoid instances of market failure occurring. There is a balance to be struck between appropriate action to tackle market failure and hindering competition and innovation.

The principle of treating customers fairly has always been a cornerstone of how the fund management industry operates. Authorised funds are subject to detailed rules and disclosure requirements. Furthermore, there is already specific FSA guidance for funds on product design and identifying target markets.”




© Investment Management Association (IMA)

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