EUROPE - The Paris-based Committee of European Securities Regulators' (CESR) investigations into the possibility of mis-practices such as late trading or market timing in the European investment fund industry has revealed organisational weaknesses in some fund managers' administrative systems.
While the probe found misconduct in the European industry was “rare”, it also found a need for companies to improve internal management processes. CESR expert group chair Lamberto Cardia commented: “The report finds that abusive business practises which exploit the mutual funds for the benefit of some privileged investors (such as late trading or market timing) are rare in Europe.
“Nevertheless, the findings of the investigation also suggest that improvements should be made to internal processes of management companies and they must rise to the challenge.
“Supervisors will certainly be focussing in on this aspect looking ahead to ensure high level of investor protection in the European investment funds.”
European Fund and Asset Management Association (FEFSI) president Wolfgang Mansfeld expressed concern over the exposed “weaknesses” but welcomed the findings of the investigations.
Administrative weaknesses could “adversely affect the high investor protection standards that fund investors enjoy in Europe,” he said.
He added: “We hope that CESR will use the investigations’ findings to coordinate the various approaches in Europe to come to a common level of investor protection, in particular but not only regarding late trading and market timing practices, for all fund investors without necessarily prompting a fresh wave of regulatory action.”
CESR members conducted the investigations on the back of a market timing scandal in the US in 2003 involving Putnam Investments.
FEFSI represents the interests of the European asset and fund management industry, which counts some 41000 investment funds with e4.7trn in assets under management.
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