SWEDEN - The Swedish Government is to extend the powers of Finansinspektionen, the Swedish Financial Supervisory Authority, over mutual fund companies and give it the ability to issue fines of up to SEK 50m (€5.4m).

The Bill, which was announced to the Swedish parliament yesterday, will provide the Finansinspektionen greater tools to sanction mutual fund companies if they fail to follow the regulations.

The Finansinspektionen only has the power at present to withdraw a company's permit or to issue a warning, but the new powers, which are expected to come into force on July 23 2008, will allow the Authority to issue fines of between SEK 5,000 and SEK 50m, depending on the type of rule breach.

A spokeswoman for the government's ministry of finance said the law was about integrating EU standards and regulations, and will provide the Authority with more possibilities to intervene and sanction companies.  

These new powers will cover all the regulations relating to fund companies, and could be triggered by a company failing to inform the customer correctly or if they do not keep their records correctly.

In addition, Mats Odell, the Swedish finance minister, revealed the Bill would also allow, where necessary, the Finansinspektionen to replace the board and management of fund companies which infringe its rules.

He said officials had become concerned about "deficiencies" in the information provided to customers by fund companies, and which he said risked damaging confidence in the system.

As a result, he has proposed the Finansinspektionen should adopt similar controls and intervention against fund companies as it does against banks, which he claimed would build confidence in the fund sector over the long-term.

Denise Valentine, senior analyst at Aite Group, pointed out investors are more sophisticated than a decade ago and as a result have "higher expectations of the government entities they believe exist to protect consumer interests".

She added: "it is unfortunate but true that government intervention, through audit or regulation, produces the most pronounced change in the behaviour of companies."

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