DBIS has published the Government’s response to the Kay Review of UK Equity Markets and Long-Term Decision Making. The Government endorses the review’s principles for equity markets. On the relationship of assets managers with their clients, the Government supports the following recommendations:
- application of fiduciary standards to all relationships in the investment chain involving discretion or advice over the investment of others, independent of the client classification. The Government has asked FSA to consider whether current regulation is aligned with this principle, in particular with regard to conflicts of interest and contractual limits to intermediaries’ obligations;
- disclosure of all costs, including transaction costs and performance fees. The Government notes increasing public debate and industry initiatives driven by concerns about charges on long-term savings products;
- review of the legal concept of fiduciary duty. The Government has already asked the Law Commission to undertake this review;
- all income from stock lending should be disclosed and rebated to investors; and
- asset managers’ remuneration should be aligned with the interests and timescales of their clients. The Government agrees that a model for achieving this is for asset managers to have long-term holdings in the fund for which they are responsible.