On Monday the FCA published proposals to tidy up the investment management market in a 35-page consultation paper on dealing commission. It will affect retail funds, including those within an Isa wrapper.
According to CP13/17, the FCA estimated that dealing commissions totalled £3bn last year, with almost half spent on research.
It stated that through its ongoing supervisory work, the regulator identified failures by some firms to make “appropriate judgements and apply adequate controls” in their use of dealing commission, especially in relation to research goods and services.
The main proposals included:
■ 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.
■ Guidance on making mixed-use assessments where investment managers purchase bundled brokerage services that contain both research and non-research elements.
Martin Wheatley, chief executive 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.
“This consultation is part of a wider debate on the need to reform the use of the dealing regime, particularly the use of dealing commissions.”
Adviser view
Malcolm Steel, director of Edinburgh-based Mearns & Company said: “It is good that the FCA is looking into this. The regulator is to be applauded for seeking to further improve fair treatment of customers and transparency.”
What Next?
Send your responses to the FCA consultation by 25 February 2014
