Investment managers will be barred from using dealing commission to pay for access to senior corporate figures, the Financial Conduct Authority (FCA) has confirmed.
In a policy statement outlining the changes to dealing commission, the regulator said investment managers must only use client dealing commission to pay for substantive research or costs related to executing trades.
FCA chief executive Martin Wheatley said: “Investors should be confident that dealing commission is only used to buy execution or research services that deliver real value.
“These changes offer firms a real opportunity to show they put their clients first and strengthen the industry’s reputation for transparency.”
The FCA consulted on guidance for how to treat corporate access in 2013. While respondents agreed it did not meet the criteria of research, some questioned how to distinguish corporate access from other parts of an event, such as investment conference.
In such cases, investment managers must be responsible for identifying which aspects are non-eligible for research and make a fair assessment of the charge they should pass on to customers.
If the corporate access is 'free', the investment manager should consider whether they are inadvertently subsidising it, and how this could affect the dealing commissions charged to the client.
Substantive research may be in the form of verbal or other non-written exchanges, the regulator said. In order for research to be 'meaningful' it must assist investment managers' ability to provide a service to their customers, althought they do not necessarily have to agree with the research conclusions.
The FCA's work on dealing commission reflects its priorities for the sector - it expects firms to ensure:
• They are acting as good agents and taking proper account of investors' interests
• They spend their clients' money as though it was their own, seeking to manage costs with as much tenacity as they pursue returns; and
• Clients are given easily understood information on the risks and costs of the service, and investment decisions reflect their stated objectives.
