Imro and SIB aim to curb trust price errors

NEW proposals to tackle the frequent mispricing of unit trust deals were published yesterday by the Investment Management Regulatory Organisation and the Securities and Investments Board, the senior financial regulator.

Numerous errors can arise in the daily revaluation of the more than 1,500 unit trusts. Robin Clark, Imro's director (member assessment), said the causes included inaccurate computer feeds, errors in identifying the correct stock, and failures in acknowledging changes to investment portfolios.

Most errors are trivial. But Mr Clark said a few cases each year had given rise to substantial problems that required unit trust companies to compensate their investors.

Existing regulations require companies to undertake what can be expensive reviews, even when the potential benefits to investors are outweighed by the costs.

The new Imro and SIB proposals seek to ensure that all price errors are corrected. But unit trust companies will have to compensate investors only when units are mispriced by more than 0.5 per cent.

Some mispricing problems have led to disciplinary action by the regulators. Dumenil, a French-owned company, ran into serious difficulties with its pricing a few years ago. Mr Clark said the fines imposed on Invesco and Confederation Life for bad administration of personal equity plans also covered pricing errors.

Many cases, however, have remained unpublicised. Mr Clark said problems had occurred at 'some well-respected major names'.