The Investment Management Association (IMA) has published a report on the use of dealing commission for the purchase of investment research.
The report reviews the current market for the purchase of externally sourced equity research by investment managers in the UK, with a particular focus on what type of arrangement benefits clients most. It sets out a structured approach for assessing the governance of research procurement. It also proposes opportunities to improve procurement processes and increase transparency to clients.
The report pays significant attention to payment for research by means of dealing commission, bundled with execution costs and paid out of client funds, which is the most common approach and which can give rise to conflicts of interest. The report highlights certain ways investment managers aim to ensure that they are as prudent in spending on client research as they would be as if it was their own money.