The FCA has decided to make a market investigation reference (MIR) to the Competition and Markets Authority (CMA) in relation to investment consultancy and fiduciary management services. This is the first time that the FCA has made such a reference to the CMA.

When the FCA published its interim report on its asset management market study in November 2016, it announced that it had made a provisional decision to make a MIR. In response, some of the larger investment consultants offered the regulator a package of undertakings in lieu (UIL) of a reference to address its concerns.

Although the FCA welcomed the UIL proposed, it felt that it could not be confident that the package would provide a comprehensive solution to the adverse effects of competition identified. In its asset management market study final report, published in June 2017, the FCA announced a provisional view to reject the UIL.

Following further consultation the FCA has now made a final decision to reject the UIL and make a MIR.

The FCA has the power to refer a market to the CMA if it has reasonable grounds for suspecting that any feature, or combination of features, of a market or markets in the UK for financial services prevents, restricts or distorts competition in connection with the supply or acquisition of those services in the UK or a part of the UK. This is called the ‘reference test’. The relevant market features can be structural in nature or can relate to the conduct of firms or customers. In practice there might not be a clear division between structural and conduct-related features.

In chapter 3 of its final decision on the MIR on investment consultancy services and fiduciary management services the FCA sets out why it is satisfied that the reference test is met.

The CMA will now begin a market investigation to review how competition is working for investment consultancy and fiduciary management services.

View FCA makes market investigation reference for investment consultancy services, 14 September 2017

View Asset Management Market Study: Final decision to make a market investigation reference on investment consultancy services, 14 September 2017