The Financial Conduct Authority (FCA) has put forward plans for a new way to pay for investment research.
The plans will allow the ‘bundling’ of payments for third-party research and trade execution, and would exist alongside those already available, such as payment from an asset manager’s own resources or from a dedicated account.
The new plans are also compatible with rules governing research payments in other major jurisdictions, making it easier for asset managers to buy research in the same way, across borders.
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The changes come after analysis by the regulator found that the current options available to UK asset managers can be operationally complex and, in some instances, favour larger asset managers. They also restrict UK asset managers’ ability to buy investment research produced outside the UK.
As part of the government’s Edinburgh reforms, an independent report on investment research suggested ways to improve UK markets.
Giving asset managers greater freedom in how they pay for research is hoped to suit firms of varying business models and sizes, helping to promote competition.
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“High quality, easily accessible investment research is a vital part of a healthy, dynamic capital market,” said FCA executive director, markets and international Sarah Pritchard. “It supports the decisions investors make.
“We are proposing to provide more options on how to pay for such research, helping boost competition and making it easier to buy research across borders.”
The FCA has engaged extensively with sell-side and buy-side firms, as well as research providers and representatives of end investors, reviewed written analysis, and conducted a detailed survey of buy-side firms to collect quantitative evidence before announcing its proposals.
The FCA aims to produce final rules in the first half of 2024, after carefully considering the feedback it receives, but the timetable will be determined by the amount, strength and breadth of the information gathered in the consultation.
The FCA will continue to work with government partners on the other recommendations relevant to it made in the independent Investment Research Review.
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