Dealing Commission Rules

As mentioned in Regulatory Roundup 51, the FCA has now released its consultation paper on the use of dealing commission – CP13/17.

In November 2012 the then FSA published “Conflicts of interest between asset managers and their customers” (see Regulatory Roundup 46). The report found evidence that some investment managers appeared not to be following the restrictions on the services and goods that can be paid for by way of dealing commission (COBS 11.6) including payment for corporate access.

As firms will be aware, COBS 11.6.8 sets out a list of items that the FCA believe do not qualify as being related to the execution of trades or the provision of research and hence dealing commission cannot be used for their payment. Although, for now, not specifically mentioned in COBS 11.6 the FCA maintains its stance that arranging access to corporate management does not amount to research and so cannot be paid for with dealing commission. Some interesting statistics in CP13/17 reveal that one asset management firm made payments for corporate access equivalent to £100,000 for each investment manager, and £500m in aggregate having been paid by UK investment managers for corporate access from dealing commission in 2012.

The draft rules, and a Handbook glossary definition of ‘corporate access service’ (the activity has also been added to the list of services not eligible for payment out of dealing commission in COBS 11.6.8) can be found in Appendix 1 of CP13/17.

The consultation period ends 25 February 2014 with a Policy Statement (and final rules) scheduled for next Spring.