Stocks and Shares

Treasury written question – answered on 3rd April 2020.

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Photo of Lord Moynihan Lord Moynihan Conservative

To ask Her Majesty's Government what steps they intend to take to ensure that financial service companies who sell funds, shares and related products to retail investors in the UK return the cash from sales transactions to the client in a timely manner.

Photo of Lord Agnew of Oulton Lord Agnew of Oulton Minister of State (HM Treasury), Minister of State (Cabinet Office)

The government is committed to ensuring that the UK has a robust framework for regulating financial services and that consumers are treated fairly.

Financial services firms are required to treat customers fairly under rules set by the Financial Conduct Authority (FCA), and the FCA is responsible for overseeing the conduct standards of financial services firms. There are a range of FCA rules governing the timeliness of payments to consumers in relation to client money and investments.

Where investments are held in funds, FCA rules specify that an authorised fund manager must pay the proceeds of a redemption to the registered holder of the fund units within four business days. Where firms hold client assets, in general FCA rules require firms to pay money to clients within one business day after it becomes due and payable.

Where an investor holds fund units through a regulated platform provider, their interactions are determined by the terms and conditions of the platform provider’s client agreement with the investor. However, regulated platform providers are subject to FCA rules on treating customers fairly with regard to these terms and conditions, and any money held under the client money rules would be paid to the client within one business day as set out above.

It would not be possible for an investor to withdraw their assets from a fund if the fund has suspended dealing. FCA rules permit suspensions, which may last only for as long as is necessary to protect the interests of the investors in the fund. Suspensions can be a necessary safety feature which protects investors where the value of a fund’s assets cannot be known with sufficient certainty or where the fund would otherwise have to make sales at distressed market prices to service withdrawals.

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