Callum McCarthy, Chairman of the UK regulator, the Financial Services Authority (FSA) has called in the Chief Executives of 25 of the largest mutual fund companies in the UK and told them that will hold them personally liable if evidence of US style late trading and market timing comes to light.
In a statement issued later, McCarthy said that he had asked the CEOS for information about these activities. “Late trading and market timing have been the subject of well publicised investigations in the US,” he said. “Although we are not driven by regulatory developments in the US, we are bound to ask whether there is scope for consumers to suffer detriment in the UK as a result of similar practices in the UK. And to that end we have already conducted a survey of fund managers in the UK, the results of which we are still analysing. But we cannot conclude, on the basis of what we have discovered so far, that abuses are not a feature of the UK system. I have therefore explained today at a meeting with Chief Executives from the unit trust sector that I expect them to take personal and direct responsibility for ensuring there is a proper review of past trading practices and that they must keep their non-Executive Directors and the FSA fully informed of the progress of those reviews. I also reminded them that late trading, market timing and shortcomings in systems and controls could be grounds for enforcement action. Looking forward, the FSA will be undertaking further data analysis and visits to firms to enable us to conclude whether and to what extent market timing and late trading take place in the UK. I have asked for further information from the firms represented today to assist us with that work. I would add that this applies to all firms in this sector.”