The Investment Management Association will undertake a fundamental review of the way asset managers use client assets to pay for access to firms’ senior management and market data after an FSA warning over unacceptable payments.
In an interview with the Financial Times this week, FSA head of asset management supervision Ed Harley raised the prospect of multi-million-pound fines for fund managers who have breached its rules.
Harley said analysis by the regulator of the use of client commissions by 15 asset managers found large payments that were “hard to justify”. He said most of these covered payments for corporate access, alongside smaller sums used for access to market data.
Harley said: “There is an awful lot of clients’ money being used here and it has to be used properly.
“When we challenged firms as to how they can justify [payments for corporate access], they couldn’t give us a coherent answer that met [the FSA’s] criteria.”
IMA director of institutional Guy Sears says: “I expect there will now be quite a few firms that will not allow any form of payment like this because of the regulatory risk involved.
“We will publish a paper in the next couple of weeks outlining how to deal with the rules as they are. We will then appoint an advisory panel that will oversee a more fundamental review because the question we want to ask is ‘Are these the right set of rules?’”
Hargreaves Lansdown senior investment manager Adrian Lowcock says: “Fund managers should not be using clients’ money to pay to speak to the chief executive of any company. This needs to be stamped out immediately.”