Regulatory Alerts2015-02-19
FS15/1: Discussion on the Use of Dealing Commission
The Financial Conduct Authority has published this feedback statement to address the £3 billion annual dealing commission regime used by investment managers to acquire external research. It consolidates stakeholder responses to the July 2014 discussion paper, evaluates proposed reforms aligned with MiFID II, and clarifies how firms should manage research payments and conflicts of interest. The regulator will proceed with a formal consultation on overall MiFID II implementation by late 2015, providing clearer guidance for investment managers, brokers, and institutional investors.
This paper reports on the main issues arising from Discussion Paper DP14/3: Discussion on the use of dealing commission regime , and sets out next steps.
Why are we publishing this paper?
Dealing commission – the charges paid by consumers when investment managers execute trades and acquire external research on their behalf – is worth around £3 billion a year. In July 2014 we published a discussion paper as part of our work looking at the way investment firms use dealing commission, and examining the wider market for research. This feedback statement:
Forms part of our broader focus on wholesale conduct.
Summarises responses received to our competition and policy analysis of potential reforms to our current dealing commission regime linked to proposals under MiFID II.
Sets out our views on further developments in EU discussions and next steps.
FS15/1: Feedback statement on DP14/3 [PDF]
Who should read this paper?
Investment managers, including UCITS management companies when carrying on scheme management activity and alternative investment fund managers (AIFMs) carrying out AIFM investment management functions 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 Individual Savings Account), or who have a direct relationship with an investment manager, for example individuals with discretionary-managed investment portfolios
Brokers (including investment banks), and third-party providers of independent research and other ancillary services supplied to investment managers
Corporate issuers
Relevant trade associations and representative bodies for the above groups
What are the next steps?
We will publish further information, including a consultation on our overall implementation of MiFID II, by late Q4 2015.
Find out more:
DP14/3 Discussion on the use of dealing commission regime (July 2014)
CP13/17 Consultation on the use of dealing commission rules (November 2013)
PS14/7 Changes to the use of dealing commission rules: feedback to CP13/17 and final rules (May 2014)
FSA Report: Conflicts of interest between asset managers and their customers: identifying and mitigating the risks (November 2012)
Martin Wheatley speech, ‘Shaping the Future in Asset Management’, FCA Asset Management Conference (October 2013)
: Link changed Old FSA link now linking to National Archive
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