The FCA has moved to clamp down on the use of dealing commission to pay brokers for setting up meetings between fund managers and company management.
In a policy statement published this morning the regulator said all payments made to brokers had to be for “substantive” research or for direct execution of trades.
FCA chief executive Martin Wheatley said: “Investors should be confident that dealing commission is only used to buy execution or research services that deliver real value. These changes offer firms a real opportunity to show they put their clients first and strengthen the industry’s reputation for transparency.”
The regulator said dealing commission payments amounted to as much as £3bn a year. An investigation by Investment Adviser’s sister title FTfm last year revealed that significant amounts were being paid to brokers and researchers for arranging meetings with company management, but the FCA said its new rules will prevent this from happening.
The regulator added that its changes “may result in a reduction in costs passed to the customer’s funds”, and emphasised that it wanted managers to spend investors’ money “as though it was their own”.
The new rules also clarify what types of costs can be passed on to investors through annual charges.
The changes to the FCA rulebook concerning dealing commission are due to come into force on June 2.
