Fund managers will have to show investors exactly what they paying for, demands FSA in its consultat...
Fund managers will have to show investors exactly what they paying for, demands FSA in its consultation paper CP176 "Bundled Brokerage and Soft Commission Arrangements" released today.
This new policy will no longer allow fund managers to charge customers for services additional to dealing without their full consent.
Additionally, if this proposal goes through, fund managers will have to discuss with their clients on how much to pay for additional services before they will make a decision.
"These proposals are designed to do away with distortions in the market and make fund managers more answerable to their clients," says Gay Huey-Evans, director of the FSA's Markets and Exchanges Division.
"Our analysis suggests changes to the regulatory approach should foster competition and ensure a better overall outcome for investors."
The FSA is also suggesting that managers should no longer be able to use soft commissions to purchase additional services from brokers.
Brokers regularly provide a range of additional services to fund managers such as market information technology and investment research.
However, the worth of the services provided is directly aligned to how much business the fund manager places with the broker. At the moment, these service costs are covered by the commission, which is paid to the fund managers by their clients.
In 2000, according to research by Oxera also published today, it is estimated that fund managers spent between £660m and £880m of their commission on services additional to dealings. UK fund managers also paid over £2.3bn as commission to UK brokers.
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