Last Thursday the U.K.’s Financial Conduct Authority (“FCA”) surprised the financial services industry by announcing it will investigate whether there is adequate competition in the investment and corporate banking markets. While the parameters of the FCA’s market study won’t be announced until this spring, the regulator stated that the market study will address previously voiced concerns around transparency, conflicts of interest, and the impact that bundling services together has on competition, including barriers to market entry. The FCA further noted it will consider undertaking a market study into asset management and related services later in the year.
The investment banking announcement accompanied the FCA’s publication of its review into competition in the wholesale sector. The review found that limited clarity over price and quality of services may make it difficult for clients to assess the adequacy of the services they receive. The review summarizes the comments the FCA received during the course of its review and explains more fully why it has decided to conduct the market study of the investment and corporate banking industry.
One day earlier the FCA published a paper on the responses it received to its discussion paper concerning the use of dealing commissions, the charges paid by consumers when investment managers execute trades and acquire external research on their behalf. That discussion paper also addressed the European Securities and Markets Authority’s (“ESMA”) proposals to the European Commission on research and inducements. The FCA supports the E.U. proposal to separate portfolio managers’ payments for research from execution arrangements and hopes to make any changes to its policy concerning dealing commission through or alongside implementation of the E.U. Markets in Financial Instruments Directive (“MiFID”) II reforms.
That same day the FCA published its thematic review of asset management firms and the risk of market abuse. The paper considers how asset management firms control the risks of insider trading, improper disclosure, and market manipulation. Although firms have implemented some practices and procedures to control the risk of market abuse, only a limited number of firms have done so in a comprehensive fashion. In particular, firms need to pay more attention to the possibility of receiving inside information through all aspects of the investment process and should improve the effectiveness of posttrade surveillance.
On Friday, February 20th, the FCA released a discussion paper on how it should collect the user fees for the maintenance of the Official List of securities and for the oversight of the Disclosure and Transparency Rules, the Prospectus Rules, and the Listing Rules. Comments should be submitted on or before April 20, 2015.
At the beginning of February the FCA published an updated Transaction Reporting User Pack (“TRUP”), which provides guidance on the MiFID transaction reporting obligations. The TRUP clarifies: that a firm’s transaction reports must accurately reflect the change in position for the firm and its client(s) resulting from the transactions; that a firm hitting its own order on a trading venue should transaction report the resultant transaction; how the unit price should be reported for different instruments; how to report the venue for a transaction; and FCA
expectations for transaction reporting arrangements within firms.
The FCA also published new rules that require the providers of workplace personal pension schemes to set up and maintain independent governance committees. These committees will act in the interests of scheme members and operate independently of the firm. Their duties include the assessment and when necessary, the raising of concerns, about the value for money of workplace personal pension schemes. And at the end of January the FCA published:
- Primary Market Bulletin No. 10, which discusses two new Technical Notes in the FCA’s Knowledge Base concerning the competence of sponsors, firms approved by the FCA to advise premium U.K. listed companies;
- Finalized guidance on the different types of retail investment sales models, the boundaries between them, and the associated regulatory requirements;
- A consultation on the Payment Systems Regulator’s competition powers (comments should be submitted on or before March 20, 2015).