More ominous noises from the Financial Conduct Authority about dealing commissions - charges for executing trades and research worth £3bn a year in the UK, FastFT reports.
In May, the FCA - the UK’s main regulator of market conduct - updated its rules on commissions to make it clear that investment managers should only pay for services directly related to executing a trade or for “substantive” research.
Today (10 July) the FCA has backed EU reforms that would further separate research from dealing commissions, in a bid to boost transparency about prices.
A new review by the watchdog has found that too few firms assess the cost of the research funded through client dealing commissions, and that the practice of bundling execution with research is making it tougher for money managers to assess the value of the research they are reading.
The FCA’s review of 17 investment managers and 13 brokers suggests that only two investment managers were “operating at the level we expect”.
It is talking to one firm about refunding clients after it used dealing commission to pay for data services in contravention of FCA rules.
Martin Wheatley, the FCA chief executive, says: “The UK is a global centre for asset management – to keep this position it is crucial that investors are confident that they get a fair deal.
“There is a strong evidence to suggest the current model of using dealing commission to pay for research reduces transparency and creates a link between research spend and trading volume, without a clear assessment of the value this offers to investors.
“I want to see a level playing field across Europe to ensure the market delivers the best outcome for investors.”
