News

Past performance formats standardised

by Compliance Monitor and Deloitte & Touche Governance and Regulation

Despite strong evidence that no meaningful relationship exists between the past and future performance of actively managed investment vehicles – the FSA says “Past performance is not a useful indicator, for consumers, of future returns” - fund managers and advisers will still be able to feature return histories in their financial promotions subject to FSA controls set out at the end of last year. Data referred to in advertisements will have to be accompanied by a table of discrete annual percentage returns over the previous five years. If a five-year record is not available the firm will be required to present as many rolling four-quarterly returns as possible up to the end of the preceding quarter. Dashes or some explanation of the absent early years must be included. If the product has not been available for a full 12 months, no data may be presented to retail customers though it will be accessible to intermediaries and professionals, who are not covered by the FSA’s advertising rules. The industry objected to the regulator’s proposed guidance that past performance should not be represented in monetary terms in large-scale promotions because it could give a misleading impression of prospective benefits; respondents also thought it odd that the FSA should move to restrict information that consumers like to see; the regulator agreed and has decided not to implement the guidance.