Investment Association – Statement of Principles

On 28 April 2015, the Investment Association published their Statement of Principles for Investment Managers. The Principles aim to set out behaviours which go beyond the regulatory requirements of “treating consumers fairly” by seeking to “represent a culture of excellence for investment managers in helping clients succeed in their financial goals”.

We set out below the ten Principles along with some individual guidance in relation to each of them:

  1. Always put your clients’ interests first and ahead of our own – this Principle sets out to clarify the position on conflicts of interest, namely that the client’s interests should come ahead of the investment manager and that every investment manager and client relationship should include an agreement setting out objectives and fees payable.
  1. Take care of clients’ money as diligently as you would of your own – this Principles sets out to ensure that investments are value for money for an investment manager’s clients.
  1. Only develop, offer and maintain funds and services designed to add value for clients and help them achieve their financial goals – this Principle aims to ensure that costs are in-line and realistic in comparison to the investment objectives. Investments should always be suitable for clients at the start and throughout the investment period.
  1. Maintain and apply the investment and operational expertise needed to meet the objectives agreed with clients – you should ensure that the governance and risk processes are robust enough to deliver and match the investment objectives of the client.
  1. Make all costs and charges transparent and understandable – charges should be thoroughly explained and there should be no hidden costs.
  1. Disclosure to investors of the course and value of any other material benefit you receive as a consequence of your role as investment managers – any value gained from investment research will be shared with the client.
  1. Ensure regular, timely and clear lines of communication with clients – this will allow clients to measure how satisfied they are with the investment’s performance, and to feel able to question any information given by the investment manager.
  1. Set out clearly your approach to the stewardship of client assets and interests – this Principle highlights the importance of considering the ethical nature of investments and ensures that investment managers encourage the ethics of investments be considered with investee companies.
  1. Maintain a corporate culture that sustains these principles – the Investment Association is seeking to provide training for investment managers to achieve these Principles, to reward investment managers that continue to achieve them and look to address “misaligned behaviours”.
  1. Work with industry colleagues and stakeholders to develop and maintain guidance on industry best practice – this is an evolving industry and the Investment Association want to ensure they continue to improve best practices within the industry, in the face of change through collaboration within the industry.

The Investment Association will hold a list of signatories to the Principles on its website from 31 July 2015.

The Principles will be revisited again in January 2017, with stakeholders having the opportunity to offer their views on them.

If you are an investment manager and require any advice in relation to the above stated principles please get in touch, Cleveland & Co, your external in-house counsel, are here to help.

To view the published Principles document, please click here.

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