The Financial Conduct Authority (FCA) is to overhaul its rules for how it regulates the investment fund industry in a bid to tackle “the problem of the money market fund”.
The regulator will publish its final rules for the sector next month, but it has already received some criticism for a range of factors.
A number of its key recommendations are controversial and critics say the regulator is moving too slowly to regulate investment funds.
“Investment fund regulators are in a state of paralysis,” said Nick Sibbett, chief executive of the Institute of Directors, an industry body.
“There is a real risk of a future where the funding market will be run on a system that is very, very slow, where we end up with a very small number of fund managers, who have a very short attention span, and then we have very high fees, and that’s really the problem.”
Investment funds have become increasingly important for investors, particularly in the housing market.
But many investors are unhappy with the lack of regulation and fear they are being used for cheap short-term gains.
Mr Sibbesons chief concern is that the FCA is pushing for rules that will lead to a boom in the fund industry, rather than an orderly transition to a market-based investment model.
“It’s going to be a big boom,” Mr Siboetts told the Financial Times.
“It will be a huge boom for fund managers.”
Mr Siblatt said the FCAs decision was an attempt to ensure that the fund sector was “fit for purpose”.
“Fund managers will be able to charge fees which will ensure that investors are getting the most bang for their buck,” he said.
Fund managers are often the focus of criticism, especially for their high fees and lack of transparency.
Many investors have complained that fund managers are using money markets as a way to earn money from clients.
Mr Gartrell said the regulator was trying to address a “misconception” about fund managers.
In the meantime, fund managers have been forced to adjust their business model, which has seen them offer clients more options for investing.
The investment fund sector is one of the biggest industries in Australia, accounting for around 8 per cent of the economy.
It is also the subject of much controversy in Australia because of the financial crash of 2008, with the value of the asset class falling by almost 70 per cent.
Investment funds have long been seen as a source of quick returns.
But the FFA has said it is concerned by the lack a regulator has set up to regulate the sector.
Mr Sibbs said he was not surprised by the FRCA’s move to reform the sector, saying the regulator has long been “the regulator for money markets”.
But he said the reform process was moving slowly and that the reform was “just the first step”.
Mr Gartrel said he believed the reform would be a “big win for fund markets”.
“Fund markets have grown massively in Australia in the last 15 years and that will continue to happen,” he told the FT.
However, Mr Gattrell warned that the reforms could have an impact on the sector and it is “very important that we do this properly, because fund markets are so important for us”.
He added: “There are a lot of issues that need to be addressed before we can build on the foundation that we have created.”
“The fund market is going to grow very, quite significantly.”
The FCA’s reforms are likely to be welcomed by fund managers who have invested billions in the sector since the crisis.
More:Topics:investment-and-finance,investment,business-economics-and/or-futures,law-crime-and_personal-fraud,finance-industry,wealth-management,australiaFirst posted September 14, 2020 13:29:46Contact Adam PurdyMore stories from New South Wales