A batch of fund firms have been forced to compensate investors £34 million (€38 million) for overcharged fees after the UK's Financial Conduct Authority (FCA) investigated 'closet tracker' funds.
Another unnamed asset manager is facing enforcement action after the FCA deemed its marketing material to be 'very misleading'.
The Sunday Telegraph, which confirmed the news, highlighted that 84 potential closet trackers were analysed, with the marketing material on of 64 deemed unsuitable. The marketing material on the other 20 funds was deemed appropriate.
According to the regulator the offending funds are passive like in their behaviour and therefore cannot justify the higher fees charged by 'active' funds.
Writing in the Sunday Telegraph, FCA executive director of supervision for wholesale and specialist investment, Megan Butler, said: 'We expect fund managers to take their duty to their consumers seriously. They should manage their funds the way consumers expect them to and tell consumers what they are doing.
'[That] is why clear promotional material for investment funds is a priority for us. When we're aware that firms haven't been clear, we have a range of powers that allow us to intervene to protect consumers.'
Butler also drew attention to 'closet constrained' funds. 'They [closet constrained funds] make active decisions but they are restricted around a benchmark.
'This may limit underperformance when markets fall but, importantly, may also constrain growth to levels similar to the benchmark,' Butler noted.
'In both cases, the way the fund is managed isn't clear, so consumers aren't getting what they expected. We expect fund managers to take their duties to consumers seriously.
'They should manage their funds the way consumers expect them to and tell consumers what they are doing. That is why clear promotional material for investment funds is a priority for us. When we're aware that firms haven't been clear, we have a range of powers that allow us to intervene to protect consumers.'
The money the fund firms are returning to investors for the higher fees they incurred on these funds is not an official FCA redress scheme.
The action comes after the FCA's of fund management in its asset management study, which it unveiled in November 2016.
The FCA found there was £109 billion in 'partly active funds charging active fees'. The final set of proposals - which include a single comparable 'all-in fee' - will be published at the end of the month.