FCA investigation into stock lending

Commenting on the Financial Conduct Authority’s (FCA) announcement that its investigation into the unit-linked funds sector will include the governance and management of funds, including stock-lending and counter-party credit risk, Gina Miller, founder of The True and Fair Campaign and co-founder of SCM Private said:

“We are delighted that the FCA is delivering clear action rather than words in examining whether unit-linked funds are acting in the interest of consumers – particularly when it comes to stock-lending and the transfer of counter-party credit risk to savers.”

Posted By: True and Fair, 12:38 pm

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“Analysis we undertook in 2011 revealed that 19 out of the 20 top retail fund managers were allowed to lend up to 100% of clients’ funds, with at least half of these funds actively participating in stock lending, yet just 66% of the gross income derived from this activity was retained for the fund, even though investors bear 100% of the risk from their savings being lent out.

While the practice of stock lending is legal, failing to disclose this to the savers whose money is being lent out is immoral and wrong. This is another example of shady practices which do nothing to restore consumer confidence in financial services, or to provide transparency on the workings of the funds they invest into.

The IMA has continued to defend stock-lending practises, which see investors bearing the risk and the fund managers’ trousering a large slice of the profits. We congratulate the FCA on its strong lead in investigating these practices and hope its findings provide a basis for a new era of transparency that puts savers interests first.”