FCA proposals to give asset managers greater flexibility on payment

Herbert Smith Freehills LLP | Mike Flockhart | Barnaby Hinnigan | Erica MacDonald

The FCA has published a consultation, CP24/7, on rules to allow UK asset managers to combine payments for third party investment research with payments for execution services.

The proposals follow the Edinburgh Reforms of December 2022, which set out the government’s plans to drive growth and competitiveness in the financial services sector, and the recommendations of Rachel Kent’s Investment Research Review, published in July 2023, to improve the UK’s investment research market.

The proposal to allow the bundling of payments is intended to give buy-side firms greater flexibility as to how they purchase investment research, and will exist alongside, rather than replacing, the existing payment options. The FCA hopes that this will make it easier for UK asset managers to charge investment research costs to clients and enable UK asset managers to purchase investment research across multiple jurisdictions. The FCA’s proposals signal an end to the rules preventing bundling of these payments which were introduced under MiFID II in 2018.

The consultation closes in June 2024, with final rules to follow shortly thereafter.

This article first appeared on Lexology. You can find the original version here.