In May 2015, the FCA launched its investment and corporate banking market study. In April 2016, the FCA published a report setting out the interim findings of the market study (Market Study 15/1.2: Investment and corporate banking market study interim report). The FCA has now published its final report, Market Study 15/1.3: Investment and corporate banking market study final report. The final report affirms the conclusions of the interim report and proposes the following remedies:
- a ban on restrictive contractual clauses. The FCA notes that at times banks use contractual clauses that restrict a client’s choice in future transactions. The FCA proposes to remove the practice of banks using such clauses and has published a separate consultation paper setting out the scope of the ban, Consultation Paper 16/31: Investment and corporate banking: prohibition of restrictive contractual clauses. The FCA expects to publish the final rules in a policy statement in early 2017;
- ending league table misrepresentation in banks’ pitches to clients. The FCA found that league tables that rank investment banks can be misleading because some banks carry out loss-making transactions purely to generate a higher position in such tables. The FCA is working with the British Bankers’ Association and the Association for Financial Markets in Europe so that they can develop and adopt industry guidelines to improve league tables in pitch presentations. The FCA does not intend to publish any guidance or rules. The FCA have also written to each of the league table providers to identify those aspects of their recognition criteria that may create incentives for league table trades. The league table providers will consider whether recognition criteria can be improved to reduce such incentives;
- a supervisory programme for initial public offering (IPO) allocations. The FCA found that allocations of shares in IPOs are at times skewed towards buy-side investors from whom banks derive greater revenues from other business lines. The FCA will work with those firms that have a significant skew in their allocation practices and whose allocation policies fall short of its existing regulatory expectations under SYSC 10 and of the relevant requirements being introduced under MiFID II; and
- a revised IPO process. The FCA’s concern about corporate finance advisers influencing syndicate analysts will be incorporated into the FCA’s work on the IPO process. The FCA expects to published a consultation paper this winter.
View Market Study 15/1.3: Investment and corporate banking market study final report, 18 October 2016