Regulatory AlertsCP13/17: Use of dealing commission
The Financial Conduct Authority proposes changes to its Conduct of Business Sourcebook rules to ensure investment managers appropriately control costs when using client funds for dealing commission. These modifications aim to clarify how execution-related and research goods and services are acquired, thereby protecting the interests of institutional and retail investors. The regulator invites comments from industry participants by 25 February 2014 as part of a broader discussion on potential long-term reforms to the dealing commission regime.
We are consulting on proposed changes to our use of dealing commission rules in our Conduct of Business Sourcebook (COBS). The changes are designed to ensure investment managers make appropriate judgements and control costs on behalf of clients when using dealing commission to pay for goods and services.
Why are we publishing this Consultation Paper?
We want to clarify our rules that allow investment managers to use dealing commissions – paid from their customers’ funds – to acquire execution-related and research goods and services.
These changes will help us to ensure that wholesale markets work well and in the best interests of consumers. We want to encourage investment managers to control costs on behalf of their customers with the same rigour as they pursue investment returns.
This CP forms part of a broader discussion launched by Martin Wheatley at the FCA Asset Management Conference in October 2013, to consider whether wider reforms are needed in the longer-term to address shortcomings in the use of dealing commission regime.
We will continue this discussion on wider reform options alongside this CP, and in light of our supervisory findings, potential EU reform in this area and an increasing industry view that existing practices should be improved.
Consultation paper 13/17
Who is this consultation aimed at?
This CP will interest:
investment managers, including alternative investment fund managers (AIFMs) and UCITS management companies when carrying out scheme management activity or AIFM investment management respectively
customers of investment managers, including:
institutional investors, for example retail fund and pension fund trustees
retail investors who have investments in retail funds (which may be through a wrapper such as an ISA), or have a direct relationship with investment managers, for example individuals with discretionary-managed investment portfolios.
It will also interest relevant trade associations, brokers (including investment banks) and providers of services such as market data services and independent research.
What are the next steps?
Online form
Please send us your comments by 25 February 2014. We intend to publish a Policy Statement in spring 2014.
Want to find out more?
For more information:
View the keynote speech by Martin Wheatley, Chief Executive of the FCA, at the FCA Asset Management Conference, London
FSA Report, Conflicts of interest between asset managers and their customers: Identifying and mitigating the risks (November 2012)
View the FCA Handbook
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