UK - The Financial Services Authority has published a supplementary policy statement to assist the industry as it strives to find a market-based solution to the transparency and accountability issues raised by soft and bundled brokerage commissions.
The policy statement sets out the FSA’s views on “non-permitted services”, “execution” and “research” and the scope of the terms, the authority said.
Regulators in the UK and US have been pushing for greater disclosure of soft commissions and bundled brokerage arrangements – traditionally a grey area in the financial services industry.
Earlier this year, the FSA released a policy statement concluding that fund managers’ use of commission should be limited to the purchase of execution and research.
The industry – including the Investment Management Association (IMA), National Association of Pension Funds (NAPF) and London Investment Banking Association (LIBA) – has committed to providing proposals on disclosure by the end of 2004.
FSA’s managing director of the wholesale business unit, Hector Sants, said: “In this document we have set out for brokers, fund managers and customers what services may not be paid for from commission and the key characteristics of execution and research.
“I am confident that this work will aid the industry in the development of a disclosure-based solution, working with the grain of the market and bringing greater transparency.”
The FSA said all services outside the soft commission regime, and some within it, should not be paid for from commission because they are not “sufficiently connected with particular investment management decisions or transactions”.
These include services related to the valuation or performance measurement of portfolios, dedicated telephone lines, subscriptions for publications, most custody services and travel, accommodation or entertainment costs.
The FSA is the UK regulator for the financial services industry.
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