This situation reinforces the need to ban dual pricing – it is opaque, it puts investors at an informational disadvantage by making pricing harder to understand, and it has resulted in their money being pocketed, risk-free, by fund houses. If an outright ban on dual pricing is not forthcoming, then the FCA should simply treat all spread proceeds in excess of the initial charge as a dilution levy, requiring that the proceeds become the sole property of the trust to the benefit of its investors.
Christopher Traulsen is head of global ratings at Morningstar
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