FCA gives backing to web-based communications by fund managers

Current rules prevent fund managers from communicating with investors on matters relating to their fund solely by publishing that information on their website. However, the Financial Conduct Authority (FCA) has proposed loosening the rules on electronic communications if investors have given their consent to that communication.

"We are proposing to allow the AFM (authorised fund manager) to amend the prospectus of a fund to provide the facility of website access for those investors who consent to it, and to introduce this as a significant change under [the Collective Investment Schemes sourcebook]," the FCA said in a new consultation paper. (78-page / 1.97MB PDF)

Under those plans AFMs would have to "ask for and receive the unitholder’s explicit agreement about which notices and documents they were willing to access through a website".

"In other words, unitholders would give their consent on an ‘opt-in’ basis," the regulator said. "We do not think it would be fair to investors to presume their consent to the change on the basis of an ‘opt-out’ invitation because it would be easy for them to overlook the notification or misunderstand its significance."

AFMs would be barred from charging for access, or for placing other restrictions on access, to their websites and would be obliged to distribute a free paper copy of documents if this is sought by unitholders.

The FCA said that fund managers would benefit from the changes due to the reduced costs associated with sending electronic communications relative to the costs of printing and distributing paper versions to investors.

"This looks to be a good move by the FCA as the AFM industry has requested to do this based on a view that investors prefer electronic communications and it will be cheaper than paper and postage," insurance law expert Bruno Geiringer of Pinsent Masons, the law firm behind Out-Law.com, said. "The development to allow electronic communications will be of particular interest to platform service providers as they hold customers' email addresses. However, not all AFMs obtain an email address from their customers and they will be at a disadvantage now."