The FCA has published Policy Statement 14/7: Changes to the use of dealing commission rules: feedback to CP13/17 and final rules (PS14/7).
In PS14/7, the FCA summarises the feedback received on its earlier consultation on proposed changes to the use of dealing commission rules and publishes final changes to COBS 11.6.
The FCA reports that there was general support for its intended outcome stated in its consultation, to ensure investment managers control the costs from the use of dealing commission appropriately, and ensure the goods and services acquired in return for commissions meets its rules and are in the best interests of their customers. However, responses on the detail of the proposed changes were more varied. In summary, the main themes in the responses were:
- there was support for the changes to the rule in COBS 11.6.3R that provides the exemption to the prohibition on the use of dealing commissions, and the criteria for substantive research in COBS 11.6.5E. The FCA has provided some further explanation on the criteria for substantive research in response to requests for clarification, but have decided to finalise the changes largely as proposed in its consultation;
- there was agreement with the FCA’s view that Corporate Access was not substantive research but some queried whether the proposed definition was too widely drawn. The FCA is maintaining the proposed definition of Corporate Access. However, it states that it has taken steps to explain its expectations where firms receive Corporate Access as part of a bundled service including the provision of substantive research. The FCA also states that it has improved and clarified the drafting of the final guidance on making mixed-use assessments;
- there should be clarification whether the FCA viewed mixed-use assessments as equally applicable to non-priced, bundled goods and services. The FCA has made some changes to improve the guidance included under COBS 11.6.8AG and has added wording to make it explicit that mixed-use assessments are equally applicable to non-priced, bundled goods and services; and
- there was challenge to the costs benefit analysis (CBA) in the consultation which determined that there would be no material additional costs to firms that already complied with existing rules. The FCA believes that its CBA assessment remains sound.
The FCA has also published the related Handbook instrument – the Conduct of Business Sourcebook (Use of Dealing Commission) (Amendment No. 2) Instrument 2014 (FCA 2014/29). These Handbook provisions come into force on 2 June 2014.
The FCA states that PS14/7 does not comment on the potential need for wider reform to the regime. The FCA will consider and comment on this as part of a further update later this year. This update will report on the findings of thematic supervisory work and discussions from a series of roundtables carried out between November 2013 and February 2014.