UK: the FCA's final rules on the use of dealing commission

The Financial Conduct Authority ("FCA") has published its policy statement on "Changes to the use of dealing commission rules" PS 14/7, which covers the issues arising from the FCA's consultation paper CP 13/17, published in November 2013 and also includes the final revised rules which are made by way of changes to COBS 11.6 of the FCA Handbook. The revised rules come into effect on 2 June 2014.

Asset managers including AIFMs authorised under the Alternative Investment Managers Directive (AIFMD) and UCITS managers (together the "Asset Managers") should review the revised rules, and amended COBS 11.6 guidance, to satisfy themselves that any goods or services purchased with dealing commissions are permitted and meet the criteria for "execution-related" and "substantive research" goods and services.  This will involve an assessment of the types of research and other services to establish whether such research provides meaningful analysis and conclusions which inform trading decisions before allocating dealing commissions to pay for it.  Any existing internal policies and procedures to allocate costs between the Asset Manager's account and the clients' accounts will need to be reviewed in light of the revised rules and adjusted if necessary to reflect the revised rules and guidance.   For more on the final rules, click here for a link to our briefing.