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08 May 2014

FCA: Changes to the use of dealing commission rules


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In its latest Policy Statement, the FCA reports on the main issues arising from the consultation on the use of dealing commission rules, and publish the final rules.


There was general support for our intended outcome as stated in CP13/17, to ensure investment managers control the costs from the use of dealing commission appropriately, and ensure the goods and services acquired in return for commissions meet our rules and are in the best interests of their customers. Most respondents agreed with the principle that investment managers should apply a similar level of scrutiny to payments for goods and services using client dealing commissions, as they would if they were spending the firm’s own money. Investment managers should review the finalised changes to our the Handbook. These changes will take effect on 2 June 2014.

The FCA has retained the requirement that an investment manager must have ‘reasonable grounds to be satisfied’ that a good or service received in return for dealing commissions ‘will reasonably assist’ them in providing its services to its customers, in response to comments received. This recognises the fact that substantive research may vary in its relevance to a manager’s day-to-day investment or trading decisions (and may include decisions not to trade or invest), especially where a service is received over a period of time.


In response to the FCA’s policy statement on forthcoming changes to dealing commission rules, Guy Sears, Director of Risk, Compliance and Legal at the Investment Management Association (IMA), said: “The FCA statement incorporates several of the clarifications the IMA sought on behalf of asset managers. For example, we felt the previous guidance on valuation and disclosure did not address sufficiently the fact that most research and corporate access is provided on a bundled unpriced basis – but now it does. "However, whilst the FCA has provided more comment about international aspects than before, the impacts on those managers with international operations still remain a challenge – especially with the new rules taking effect in only 16 working days. In the meanwhile, we continue our work on revising the IMA disclosure codes and providing assistance to our members on conflict management, budgeting and oversight."

FCA media release

Full FCA Policy Statement

Full IMA response to FCA statement

IMA recommendations on the use of dealing commission for the purchase of investment research



© FCA - Financial Conduct Authority


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