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FCA to clear up dealing commission rules in corporate access crackdown

Regulator defines corporate access to prevent managers using dealing commissions to pay for services outside of ‘research’.

The FCA is to set out specific criteria for what goods and services asset managers can buy with dealing commission paid from customers’ funds.

The regulator has published a consultation paper this week into a package of measures aimed at preventing fund groups from using dealing commissions to pay for services outside of its definition of “research”.

The FCA warns the current process of what dealing commissions are spent on lacks transparency, and says it has found significant payments for corporate access by individual firms.

Asset managers pay brokers commission to cover trading fees and for research to help work out investment strategies, and pass this cost on to customers.

Firms are not allowed to use dealing commission to pay for access to company executives.

The consultation proposes to define corporate access in its conduct of business rules as: “A service of arranging or bringing about contact between an investment manager and an issuer or potential issuer.”

The regulator wants to clarify what goods and services can be bought with dealing commission. It is also consulting on guidance on bundled brokerage services that contain both research and non-research elements, to ensure only research is paid for with dealing commission.

The regulator defines research as information capable of adding value to the investment or trading decisions; which represents original thought; has intellectual rigour; and involves analysis or manipulation of data to reach meaningful conclusions.

The JHC Partnership director Keith Iles says: “This is an encouraging move from the FCA but there is a long way to go in shining a light on the complexities of the fund management industry.”


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