FINLAND: Clarity still needed in Relation to Key Investor Information Documents of Finnish Investment Funds

Thursday May 2 2013

The Financial Supervisory Authority of Finland, on 2 May 2013, reported that Finnish investment funds` key investor information documents generally meet the requirements. But many management companies still need to make improvements, as regards the clarity of the description of investment policy.

The description of a fund`s investment policy should state in a clear and comprehensible manner how and where the fund invests its assets. The focus should be on the actual nature of the fund`s investments at given times.

In FIN-FSA`s view, the recommended holding period should be based on a fund-specific documented risk assessment and it should realistically describe the fund-specific risks. Based on the recommendation, the customer should get an idea of the length of time he should be prepared to wait for the investment`s risk and reward profile to reach a reasonable level with sufficiently high probability.

FIN-FSA urges management companies to conduct fund-specific examinations and assessments of the applicability of their recommended holding periods in light of the markets in which their investment funds are investing.

In their descriptions of the risk and reward profiles in key investor information documents, many management companies also describe risks that are not necessarily relevant for the specific fund. Management companies should in future keep in mind the fact that in this section focus should be on the risks that are material to the fund`s investments.

FIN-FSA recommends that management companies use the on-going charges ratio also in a fund`s prospectus and marketing material.

Please see the above link for more details.