The Financial Conduct Authority has proposed introducing new rules which would aim to make charges paid by investors to asset managers for executing trades and other services more fair and transparent.
A new formal consultation launched today (25 November) by the regulator follows remarks by its chief executive officer Martin Wheatley at the FCA Asset Management Conference in October which addressed concerns for potential flaws in the use of dealing commission.
Mr Wheatley claimed asset managers are using client money to pay for services the cost of which they should bear themselves.
The main proposals that will be consulted on include:
• Clarifying the criteria for research goods and services that can be purchased by investment managers with dealing commission paid from customers’ funds;
• Defining ‘corporate access’ and providing guidance on how investment managers should treat corporate access under the use of dealing commission rules; and
• Guidance on making mixed-use assessments where investment managers purchase bundled brokerage services that contain both research and non-research elements, to ensure that only research is paid for with dealing commission.
Martin Wheatley, chief executive officer of the FCA, said: “We need to be confident that managers are putting their clients’ value for money, good returns, and transparency at the heart of how they do business. So today’s consultation is part of a wider debate on the need to reform the use of the dealing regime, particularly the use of dealing commissions, and how industry practice can be improved now to the benefit of all.
“As a forward-looking regulator, we expect firms to exercise judgement to act in the best interest of their clients – seeking to manage their clients’ costs as effectively as they pursue investment returns.”
In response to his remarks at the Asset Management Conference, City law firm Pinsent Masons called for “balance” and warned that too much regulation of asset management firms could damage London’s reputation.
Earlier this month (14 November), Mr Wheatley reiterated his concerns in a speech at the CFA European investment conference, saying he is looking to introduce standards which go beyond the “relatively limited regulation of the past” and focus on setting boundaries and ensuring the safety of client money.
The consultation closes on 25 February 2014.
