Fund managers have been warned that they are not allocating sufficient funds
to deal with pending European Union regulation that will require substantial
investment in internal controls and accounting procedures.
Speaking at the release of the CBI/PwC Financial Services survey for the last
quarter of 2005, Pars Purewal, UK investment management leader at PwC, said fund
managers were not spending enough on the new regulations.
The survey found that overall profitability in the financial services sector
had grown at the fastest rate for a decade over the last three months, climbing
41%, with fund management soaring 75%.
Costs for fund managers also increased, doubling in the last quarter, but
Purewal warned that more of this spend needed to be directed towards
preparations for the Markets in Financial Instruments Directive (Mifid), which
comes into force in November 2007.
‘Not enough money has been set aside for Mifid, which have a significant
affect on back office operations,’ said Purewal. ‘The perception is that the
deadline is a long way away, but there is a lot to do and fund managers have
been a little slow to start.’
The FSA has already contacted advising companies to begin implementing Mifid
shortly. The directive aims to harmonise regulation of fund management and
financial services across Europe.
Companies affected by Mifid will have to enhance compliance arrangements for
personal transactions, improve internal audit and accounting procedures and
bolster business transparency and transaction reporting.
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