While current research payment options available to UK asset managers are adequate, the Financial Conduct Authority (FCA) has put forward plans for a new way to pay to, in turn, create a more competitive market.
This change has been done to create a fairer market for smaller asset managers who can sometimes struggle with operational complexities. Additionally, the current rules also restrict UK asset managers’ ability to buy investment research produced outside the UK.
As a result, the FCA engaged with both sides of the investment cycle to formulate fair proposals. As well as understanding both the sell-side and buy-side views, the FCA spoke to research providers and representatives of end investors. Consequently, it created a detailed survey of buy-side firms to collect quantitative evidence to shape its changes.
The FCA aims to produce final rules in the first half of 2024, after carefully considering the feedback it receives, but the timetable will be determined by the amount, strength and breadth of the information gathered in the consultation. It will also continue to work with government partners on the other recommendations relevant to it made in the independent Investment Research Review.
Creating a competitive landscape
As part of the government’s Edinburgh reforms, an independent report on investment research suggested ways to improve UK markets.
Ensuring there is competition in the UK investment space is the best way to create a healthy environment for the sector and the FCA has, as a result, proposed new ways to achieve this. UK asset managers will now be met with greater choice when paying for research. This will consequently, also improve investment decisions.
Sarah Pritchard, executive director, markets and international, FCA said: “High quality, easily accessible investment research is a vital part of a healthy, dynamic capital market. It supports the decisions investors make.
“We are proposing to provide more options on how to pay for such research, helping boost competition and making it easier to buy research across borders.”
Businesses of different sizes will be able to capitalise on the new ‘bundling’ of payments for third-party research and trade execution. This would exist alongside options already available. For example, payment from an asset manager’s own resources or from a dedicated account.
The new plans are also compatible with rules governing research payments in certain other major jurisdictions, making it easier for asset managers to buy research in the same way, across borders.
