The regulator wants fund managers to stay in close contact ahead of any suspensions in trading and reminded the market of its duty to act in the best interests of all investors.
The regulator commented: “It is the duty of the fund manager to ensure that assets are valued fairly and accurately and to ensure that any subscriptions or redemptions of units take place at a fair price. Failure to do so may lead to some investors gaining at the expense of other investors in the same fund.”
The regulator was keen to give specific guidance on when to resume dealings and how to offer redemption options to investors for illiquid or hard to value assets such as commercial property. In setting a redemption price for investors the FCA said fund managers should ensure the following:
- The revised redemption price and the opportunity to cancel are clearly communicated to investors who have submitted a request to redeem their investment before or during the fund’s suspension
- This communication explains the options that are available to investors and includes details of how to cancel the redemption requests
- Investors are given sufficient time to make their decision and to seek appropriate advice. This timeframe should take into account the types of investor in the fund and whether communications to these investors need to take place through an intermediary
Danny Cox, chartered financial planner at Hargreaves Lansdown said the suspension had prompted a number of client questions and commented: “You are kind of in a situation where you cannot do much other than sit tight. Some people will have the option to come out, albeit at fairly substantial fair price adjustments with other dilution levies, but what we are doing is informing clients of when funds re-open, if they are currently gating, and understanding what the costs might be.”
Cox felt the funds were likely to be suspended for months rather than weeks and added: “We have said for many years that the open ended structure is the wrong type of structure for property funds because of exactly these liquidity issues.”
