FCA sets out expectations for investment managers on dealing commission
8 May 2014 01:07 PM
Investment managers should only use client
dealing commission to pay for substantive research or costs related to
executing trades, the Financial Conduct Authority (FCA) said today as it
published a policy statement on forthcoming changes to dealing commission
rules
The
changes reinforce the current rules and provide greater clarity on what
investment managers can pay for using client dealing commission – worth
approximately £3 billion per year. Firms that already meet the rules will
not need to make significant changes to the way they operate.
FCA
chief executive, Martin Wheatley, said:
“Investors should be confident that dealing
commission is only used to buy execution or research services that deliver real
value. These changes offer firms a real opportunity to show they put their
clients first and strengthen the industry’s reputation for
transparency.”
The
UK is a global centre for investment management, and the sector is vital to the
UK’s economy, investing over £5 trillion on behalf of clients
across the world. The FCA’s work on dealing commission reflects its
priorities for the sector – it expects firms to ensure:
- They are acting as good agents and taking proper account
of investors’ interests;
- They spend their clients’ money as though it was
their own, seeking to manage costs with as much tenacity as they pursue
returns; and
- Clients are given easily understood information on the
risks and costs of the service, and investment decisions reflect their stated
objectives.
The
changes on dealing commission come into force on 2 June 2014 and are a result
of extensive industry consultation. They will prevent investment managers using
dealing commission to pay for access to senior staff at firms they invest in
(corporate access).
The
changes also clarify which costs investment managers can pass on to their
clients through dealing commission, including specific guidance on mixed use
assessments, where substantive research is bundled together with services that
firms cannot pay for using dealing commission. Past reviews found that controls
on how dealing commission is spent could be improved and in 2012 we asked firms
to confirm their controls were effective.
The
FCA has a statutory objective to secure appropriate protection for consumers
and enhance market integrity.
Notes for editors
- The policy statement on dealing commission, and relatedconsultation paper
- On
the 1 April 2013 the FCA became responsible for the conduct supervision of all
regulated financial firms and the prudential supervision of those not
supervised by the Prudential Regulation Authority (PRA).
- The
FCA has an overarching strategic objective of ensuring the relevant markets
function well. To support this it has three operational objectives: to secure
an appropriate degree of protection for consumers; to protect and enhance the
integrity of the UK financial system; and to promote effective competition in
the interests of consumers.
- Find out more
information about the FCA.