The FCA has published a new web page stating that it has visited 17 firms to assess their dealing commission arrangements, including how they have responded to the examples of good and poor practice from its earlier Discussion Paper on the use of dealing commission published in 2014.
The FCA states that the majority of the firms it visited fell short of its expectations. This includes how firms:
- assess whether a research good or service is substantive;
- attribute a price or cost to substantive research if they receive it in return for dealing commission; and
- record their assessments to demonstrate they are meeting COBS 11.6.3R and are not spending more of their customers’ money than necessary.
The FCA identified poor practices at the majority of firms it visited and several could not demonstrate meaningful improvements in terms of how they spend their customers’ money through their dealing commission arrangements.
The FCA’s web page further discusses the practices it found in relation to research budgets, research polls and voting, systems, controls and record keeping and conflicts of interest. In terms of further issues the FCA states that it is concerned to see that some firms with overseas operations and those that delegated investment management services failed to implement controls and oversight structures to ensure the activities they outsource comply with the FCA’s rules. Firms that operate ‘global’ commission models are reminded that they must meet the FCA’s requirements on their investment management activities that take place in the UK, including COBS 11.6.
The FCA states that it will continue to focus on the use of dealing commission. Where it identifies breaches of its rules or principles, it will consider appropriate action, including more detailed investigations into specific firms, individuals or practices.
View FCA sets out expectations on use of dealing commission, 3 March 2017