Martin Wheatley, chief executive of the Financial Conduct Authority (FCA), today calls for greater transparency to boost the reputation of the asset management sector and a frank and open discussion on how and where dealing commission is spent.
The FCA will be consulting with asset managers to see what changes need to be made to the existing regulation, which have been in place since 2006. A specific concern is that some asset managers are pushing the definition of ‘research’ by using client commissions to cover non eligible costs and services.
Martin Wheatley will say:
“This is a critical period for the industry; a crossroads. So today we ask some challenging questions. Are we internationally competitive? Are charges and fees transparent? Are there inherent conflicts within the system? Today we start a debate.
“We need to be confident that managers are putting their clients’ value for money, good returns, and transparency at the heart of how they do business. Then the discussion is about how best to get there – is evolution enough or do we collectively need to be more revolutionary?”
Martin will confirm that the FCA would be working with the industry to develop a proportionate regulatory solution. The roadmap for change will include:
- Working with asset managers in the UK and policy makers in Europe to find a balanced regulatory solution;
- Launching a consultation paper in November to clarify rules on research, including guidance around corporate access; and
- A thematic review that follows up on the FCA’s earlier work looking at conflicts of interest within asset management.
The FCA’s concerns about transparency are shared by industry practitioners and representatives, including the Investment Management Association (IMA). Speaking in response to Martin Wheatley’s announcement of a review of the use of dealing commissions in the purchase of research, IMA Chief Executive, Daniel Godfrey, said:
“The IMA has been conducting a significant review of this market for some months and we expect to be able to report our conclusions early in the New Year. Our clear objective is to ensure we deliver the greatest possible value for money, transparency and accountability to our customers and we will explore all possible avenues to make sure we do just that.”
The asset management sector includes 2,100 authorised firms, employs more than 29,000 people across the UK, and holds £5.2 trillion assets under management.
The FCA’s asset management conference, being held at the Excel Centre in East London, is an opportunity for the FCA to explain its strategic approach to regulation of the sector, and discuss some of the key pieces of work it will be doing in the future.
During the day staff at the FCA will host breakout sessions on different aspects of its regulation of asset management. One of these will focus on anti-money laundering (AML) and anti-bribery and corruption (ABC) controls. Later this week the FCA will publish the findings of a review of 22 that shows good examples of risk management, but also reveals too many common weaknesses.
Notes to Editors
- Martin Wheatley's speech[1]. Video of Martin[2] at the conference.
- Director of supervision Clive Adamson's speech[3].
- On 1 April 2013 the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- Find out more information about the FCA, as well as how it is different to the PRA.