FCA Study on Competition in Investment and Corporate Banking Services

The FCA has announced plans to launch its first wholesale market study into investment and corporate banking to assess whether competition in the sector is working properly. The study will focus on the impact of transparency and bundling on competition for investment and corporate banking services. Terms of reference will be published in Spring 2015. Later in 2015, the FCA will consider undertaking a market study into asset management and related services.

Read "FCA to investigate competition in investment and corporate banking services following review of wholesale markets"

Dealing Commission Consultation

The FCA has published a feedback statement on the use of dealing commission (FS15/1). The FCA says it strongly supports ESMA’s final advice position to the European Commission, which treats research received by portfolio managers from brokers as an “inducement” that portfolio managers would not be permitted to receive under MiFID II, subject to a new “safe harbour” under which a portfolio manager could either pay for the research out of its own resources or using a “research payment account” paid for by clients, subject to conditions. Final rules will need to be drafted and adopted by the European Commission as part of MiFID II, which is scheduled to come into force on 3 January 2017. In its feedback statement, the FCA said that it prefers to implement any further changes to its dealing commission rules in line with final MiFID II position. The FCA also expects to publish a consultation on its implementation of MiFID II later this year.

Read "Feedback statement on DP14/3 – Discussion on the use of dealing commission regime"

FCA Publishes Market Abuse Review Findings

The FCA has published a paper containing its findings on the thematic review of how asset management firms control the risk of committing market abuse. The regulator found that in all but a few firms, further work is required to ensure practices and procedures to control the risk of market abuse operate effectively and cover all material risks. In particular, firms need to pay more attention to the possibility of receiving inside information through all aspects of the investment process and take steps to manage this risk. Firms generally also need to improve the effectiveness of post-trade surveillance. Only a minority of firms were found to have appropriate controls for these matters. The FCA will be writing to firms in its thematic sample to provide individual feedback and it advises that senior management of asset management firms need to satisfy themselves that there are in place appropriate practices to manage the risk of market abuse.

Read "Asset management firms and the risk of market abuse"

FCA Updates Guidance on Transaction Reporting

The FCA has published a revised transaction reporting user pack (TRUP). The TRUP provides guidance to firms on understanding the MiFID transaction reporting obligations, implemented through SUP17 of the FCA Handbook. The TRUP has been updated and the proposed text was consulted on.

Clarification was provided on the following:

• That transaction reports must accurately reflect the change in position for the firm and its client(s) resulting from the transactions.
• That a firm “hitting” its own order on a trading venue should report the resultant transaction.
• How the unit price should be reported for different instruments.
• How to report the venue for a transaction.
• What is expected for transaction reporting arrangements within firms. 

The final text of Version 3.1 became effective immediately on publication.

Read "TRUP Version 3.1 finalised guidance"

Investment Association Paper on Disclosure of Costs and Charges

The Investment Association (formerly the Investment Management Association) has published a paper on the ‘Meaningful Disclosure of Costs and Charges’ which provides new proposals for discussion with regulators, government, the industry, and investors and their representatives. The Association is proposing a new methodology for a consistent calculation of the portfolio turnover rate (PTR); allowing for a consistent disclosure framework for charges and transaction costs; and sets out how all the explicit and implicit costs incurred when investing in a fund should be disclosed to the end investor.

Read "Meaningful Disclosure of Costs and Charges" (PDF)