FCA finalises dealing commission changes: FCA has published its final rules that amend the Conduct of Business Sourcebook (COBS) in respect of permitted use of dealing commission. FCA had originally proposed changes after a thematic review found many investment managers had inadequate controls and oversight when acquiring research goods and services from third parties in return for client dealing commissions. Its proposals were intended to clarify existing rules. The final rules, which take effect on 2 June:

  • clarify the circumstances in which the ban on investment managers accepting any good or service in addition to the execution of its customer orders where that good or service is offered in return for passing on a relevant third party's charges to customers does not apply. The new rules state this is where:
    • the investment manager has reasonable grounds to be satisfied the good or service will reasonably assist the manager in the provision of its services to its customers;
    • the manager's receipt of the good or service does not, and is not likely to, impair compliance with the manager's duty to act in its customers' best interests; and
    • the good or service is directly related to execution of trades on behalf of the manager's customers or amounts to the provision of substantive research;
  • introduce a new definition of "corporate access service", and amend COBS 11.6.8G to confirm that corporate access services are an example of goods and services which FCA does not regard as meeting these requirements;
  • set out new explicit guidance on how investment managers should pay regard to the client's best interests rule in passing on charges - with specific reference to how to quantify the pricing of a charge and how to separate elements of a service that only in part comprise substantive research; and
  • remind firms of the need to keep appropriate records to evidence why they consider the exemption applies.

FCA notes that firms already complying with its rules should not have to make significant changes to their policies and procedures to reflect these amendments. (Source: FCA Finalises Dealing Commission Changes)

Up next from FCA: FCA's latest Policy Development Update highlights few significant publications before the end of June. The key expected publications are:

  • policy statement on fees and levies in June; and
  • feedback and further consultation on listing changes in May.

Several papers on Solvency 2 are scheduled for the third quarter of the year. (Source: Up Next From FCA)

FCA updates on hedging review: FCA has published the latest figures showing how banks are progressing the review of interest rate hedging products. All banks are on track to finish their reviews and make offers of redress within 12 months of starting the review. (Source: FCA Updates on Hedging Review)

FCA updates AIFM pages: FCA has updated its website to show schedules of alternative investment funds (AIFs) for full-scope and small authorised and registered UK AIF managers (AIFMs). It has also provided a disclosure checklist and new information on registration as a European Social Entrepreneurship or Venture Capital Fund manager. (Source: FCA Updates AIFM Pages)

FCA publishes results of fund charges review: FCA has published the results and conclusions of its thematic review into how firms operating funds disclose their charges to retail investors. FCA found instances of lack of clarity and expects firms to use an ongoing charges figure (OCF), rather than the annual management charge (AMC), as headline charges figure in all marketing material for UCITS funds. The OCF represents all costs of a fund, including those related to the register of investors, calculating the price of units/shares and safekeeping. The Investment Management Association (IMA) has welcomed FCA's position, as IMA's guidance has long been that its members should exclusively use the OMC, as it is easy to understand and to compare. (Source: Clarity of Fund Charges and IMA Response)

FCA speaks on "what good looks like": Speaking at the Building Societies Association, Clive Adamson, FCA Director of Supervision, has explained FCA's focus on outcomes and fair treatment of customers. He reviewed the implications in terms of business model, culture, product design and governance, and then commented on some of the big issues currently affecting building societies. He noted that he has seen a sea change in the attention being paid to the conduct agenda, which is no longer left to compliance, but is rather taken up by management and boards. (Source: FCA One Year On)

FCA consults on TRUP clarifications: FCA is consulting on several minor corrections and clarifications to its Transaction Reporting User Pack (TRUP). (Source: FCA Consults on TRUP Clarifications)

FCA publishes list of consumer credit firms without interim permission: FCA has published a list of the firms that held consumer credit licences from the Office of Fair Trading who do not hold interim permissions, together with the reasons the firms have given for why they do not have interim permission. (Source: FCA Publishes List of Consumer Credit Firms Without Interim Permission)