FSA To Allow More Flexible Unit Pricing

by Robin Pilgrim, LawAndTax-News.com, London

24 April 2006

The UK's Financial Services Authority on Thursday outlined proposals designed to allow fund managers more flexibility to adopt single or dual pricing of units in authorised Collective Investment Schemes.

Currently, investment companies with variable capital (ICVCs), also known as open-ended investment companies (OEICs), have to value units on a single-pricing basis while authorised unit trusts (AUTs) are able to quote either single or dual prices.

The long established dual-pricing method is based on one price being quoted to investors who want to buy units and a different lower price to those who want to sell units. The single pricing method first introduced for ICVCs in 1997 is based on a mid-market value between bid and offer prices.

The proposals published last week complete the FSA's review of the rules for authorised funds, which aims to deliver a more streamlined and principles-based regulatory regime and has resulted in the introduction of the new Collective Investment Schemes Sourcebook (COLL).

Dan Waters, FSA Director Retail Policy and Asset Management Sector Leader stated that:

"No method of unit pricing is perfect or demonstrably superior to others in every situation. It fits with the principles-based regulation we seek to operate that each fund manager should judge for itself how to meet the needs and expectations of investors, provided the method adopted is compatible with fundamental standards of accuracy, fairness to all unitholders and transparency, and can be understood by investors.”

Subject to the outcome of the Consultation, the new rules on unit pricing will come into effect in February 2007 as part of the COLL rules.

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