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02 August 2012

IMA: IOSCO makes strong progress on fund liquidity management principles

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The IMA recommends that IOSCO encourages regulators to review the efficacy of liquidity management tools available to managers for both inflows and outflows.

The IMA has submitted its response to the International Organisation of Securities Commission’s (IOSCO) proposals for liquidity risk management in Collective Investment Schemes (CIS). The IMA welcomes IOSCO’s initiative in setting out proposed principles for the management of liquidity. These are in keeping with UK regulatory standards and reflect existing industry practice for UK-authorised funds. There is, however, one important aspect that IOSCO’s work does not cover; namely, the management of inflows. IOSCO’s proposals cover solely the management of liquidity to meet redemptions. It is equally important to manage money coming into a fund. Managers of UK funds do this as a matter of course and it should be reflected in the principles.

Regulators should, for example, make sure that managers have the ability to cease selling units where it is in the best interests of the fund and existing investors. Julie Patterson, IMA Director of Authorised Funds and Tax, said: “IOSCO’s proposals reflect current UK rules, well-established IMA member guidance and UK industry practice. We welcome them. We note, though, that it is in the best interests of investors for IOSCO’s principles to cover periods of both high inflows and high outflows, and that managers should have the tools to manage both scenarios.”

Press release


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