UK - Schemes will be able to save up to £900m in trading costs as part of an FSA clampdown on fund managers and soft commission costs.
The FSA says UK institutional fund managers paid £2.3bn in commission to brokers in 2001, of which between £660m and £880m was spent on services “additional to dealing”.
The regulator has also mooted a radical shake-up of the commission arrangements between fund managers and stock brokers by banning managers from using soft commissions to buy services such as dealing screens.
Under the FSA proposals, fund managers will be barred from passing on the costs of non-dealing services to clients without their express consent.Instead, firms will have to negotiate with schemes on how much to pay for such services.
FSA markets and exchanges division director Gay Huey-Evans said: “Up to 40% of total commission spending is used to acquire services additional to dealing, so it is important that investors are clear on how their money is spent.
“These proposals are designed to do away with distortions in the market and make fund managers more answerable to their clients.
“Our analysis suggests changes to the regulatory approach should foster competition and ensure a better overall outcome for investors.”
But fund managers claim the issues the FSA is tackling have already been dealt with by the industry.
Allianz Dresdner Asset Management head of UK and Ireland business development Eilish O’Hagan said: “There are not many institutional players who would try to pass on the costs of non-dealing services anyway – that’s both pre- and post-Myners.”
Investment Management Association chief executive Richard Saunders added: “The impact of these proposals will be significant, but not revolutionary.
“There will be fewer analysts. And the execution of deals will become even more concentrated.”
The deadline for comment on the proposals is August 29.
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