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March 24, 2004 at 07:00 PM
LONDON (HedgeWorld.com)–Mutual funds shareholders in the United Kingdom are not immune to market timers, but they have not been affected to anywhere near the extent that shareholders in the United States have been, according to a new report from the Financial Services Authority.
Although the FSA stopped short of issuing any kind of regulatory “all clear,” officials there believe that current safeguards against late trading and market timing have been effective. A survey late in 2003 of 31 Collective Investment Schemes with approximately 160 billion pounds sterling in assets–roughly 75% of all assets in such schemes–showed no evidence of late trading and only about 5 million pounds sterling worth of market-timing activity.
As part of its investigation, the FSA looked at 9,620 transactions, of which 118 were examined more closely during site visits to the funds involved, according to a statement from the FSA.
“The picture we have uncovered is generally quite an encouraging one,” FSA Managing Director Michael Foot said. “Although there is evidence of market timing having occurred within our authorized funds, looking at all the evidence we have amassed, we can find no sign either that market timing is widespread or that it has been a major source of detriment to long-term investors.”
Speaking at the U.K.’s National Association of Pension Funds conference, FSA Chief Executive John Tiner said his agency undertook the investigation in response to the growing mutual fund scandal in the United States. He said the goal was to determine if fund managers were being vigilant in blocking market timing and late trading and whether the controls they used to do so were effective.
“We found no evidence of late trading in U.K. CIS, and we think that the important controls provided throughout trustee and depositary structures make U.K. funds less susceptible to this practice,” Mr. Tiner told conference attendees.
