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Law firms say preferential share class deals could breach competition laws

Law firms have warned fund managers that launching preferential share classes for individual platforms could breach competition laws.

Pinsent Masons competition partner Alan Davis says if certain platforms are given access to a fund at a discounted price it could be in breach of competition laws because it could discriminate against those platforms that are declined the lower price.

Davis says: “It could be viewed that the fund managers are saying they will make sure other competitors are excluded from the market and that could be a form of an agreement to discriminate.”

He adds any collusion between platforms to ensure they collectively receive clean share classes from fund managers at a lower rate than other competitors could breach competition rules. In this situation, the platforms would have to hold a combined market share of over 50 per cent to be in breach of the laws. 

Eversheds partner Michael Wainwright says: “Fund managers and platforms need to be mindful of their duties under competition law, as well as the FCA’s new mandate to promote effective competition in the interests of consumers.”

Following HM Revenue & Customs’ announcement last month that platform rebates are to be taxed, both Skandia and Standard Life said they will seek preferential terms with fund managers.

Money Marketing understands a number of platforms have contacted their legal teams to look at how they could challenge any moves by other platforms to set up preferential deals. 

Avalon director Harry Kerr says: “It is a sign of desperation that big platforms are looking for better rates. Such deals could be seen as a kind of cartel because you are restricting access to trade.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. The RDR hits just keep on rolling! When are people in charge ever going to do something to stop this ridiculous thing from destroying an entire industry. RDR does not make anything any better. So far everyone is losing out except those who conceived of this mentally insane project which has unfortunately become reality. Just stop it and go back to pre rdr until all the downsides have been ironed out and those for whom it was meant to deliver better results for are actually going to be put in a place that improves their situation with a new version that does not rip things apart. As Martin Wheatley said “this is not rocket science”

  2. Thank goodness the people in charge know what they 18th April 2013 at 10:53 am

    Lets just ask the individuals at the regulator who were responsible for the creation and implementation of RDR, as Im sure they had the intelligence, imagination and foresight to consider ALL the consequences for the industry as a whole (including legal and tax) so they will have taken account of this and can easily explain why all of this has no industry or consumer detriment at all?

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