City watchdog reminds firms managing funds to watch their language in customer communications

Hayley Kirton
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Firms managing funds might need to clean up their language (Source: Getty)

Firms managing funds must be careful to make sure their product descriptions are clear and free of jargon, the results of a review published today show.

The review by the Financial Conduct Authority (FCA) found that, while the majority of the firms it studied in its sample were investing in line with the strategy they had set out, some were not providing consumers with a clear enough picture of their product or failing to provide funds with adequate governance or oversight.

"The industry needs to consider how it communicates when funds are linked to financial benchmarks," said Megan Butler, director of supervision at the FCA. "It is also vital that funds keep investment practices under review so they match their stated aims and strategy, irrespective of whether the fund is still actively marketed, because investors base their decisions on this information."

Elizabeth Budd, partner at Pinsent Masons, remarked: "The FCA takes a dim view of firms using jargon retail customers may not understand and of "closet trackers" where a fund passively tracks an index without disclosing this to investors. FCA expects clear, full disclosure consistent across the entire customer-facing document pack and firms must remember that documents may be available to customers from a range of different sources when they check they are all on-message."