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The Guide has been prepared recognising that there is not currently a detailed set of rule requirements placed on unit linked fund managers. Instead, the FSA set out a framework of principles for business which senior management must apply and interpret, coupled with some specific requirements in particular areas, such as permitted links for investments.
The guiding principle throughout this document is that firms must act in accordance with the FSA's Principles for Business, including the need to comply with the Treating Customers Fairly (TCF) requirements, which forms part of the FSA Handbook. TCF incorporates a number of elements including 'Policyholders' Reasonable Expectations' (PRE) but is a much broader concept.
The original edition of this Guide was prepared by a working group of the Association of British Insurers (ABI) to provide more specific guidance to firms looking to understand what TCF means in the context of unit linked fund governance. This new edition has also been prepared by an ABI working group and has been updated to take account of developments in practice and experience gained in using the original Guide. The FSA has also indicated that it will take account of the standards set out in this Guide in their supervision of unit linked life offices.
It is recognised that some funds will have either a significant or exclusively institutional investor base, which may influence how the standards in this document are applied. Wholesale fund parameters will differ in some areas and in these cases firms will rightly depart from the standards indicated as appropriate to retail customers.
There is also a distinction to be drawn between closed funds, which have a finite lifetime and revenue stream, and those funds continuing to accept new customers. In the former case, closed funds should still review their existing practices and work towards the standards in this Guide, but complex or expensive systems changes may not be financially viable and an appropriate balance will need to be struck between raising standards and sustaining the business in run off.