Investment management update - September 2017

21 September 2017

In this issue: Paying for research under MiFID II - UK regulated funds - time pressure; FCA reminder re MiFID II authorisations; Transaction cost disclosure in workplace pensions; and Investment consultants to be referred to the CMA.

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21.09.2017 - Paying for research under MiFID II - UK regulated funds - time pressure

Operators of UK regulated funds need to act quickly if they wish to introduce a research payment account in order to pay for research; or increase the management fee in order to cover the cost of the operator “paying hard” for research.

In order for the change to be effective when MiFID II comes into force on 3 January 2018, in either of the above cases an FCA application is likely to be required and 60 days’ notice will need to be given to investors in advance of the change taking effect.

This means that an FCA application will need to be submitted by the end of September 2017.

18.09.2017 - FCA reminder re MiFID II authorisations

FCA has published a reminder that firms which need to become authorised before MiFID II takes effect or which need variations to their existing permissions by that time should get their applications in without delay, if they have not already done so.  This may include, for example, firms seeking to operate trading venues or wishing to become Data Reporting Services Providers.

Equally, firms which have already submitted applications but have been told they are incomplete must supply the missing information as soon as possible.

MiFID II takes effect on 3 January 2018.

20.09.2017 - Transaction cost disclosure in workplace pensions

The FCA has published Policy Statement PS 17/20 on disclosure of transaction costs in defined contribution (DC) workplace pension schemes.

The Policy Statement incorporates amendments to FCA’s Conduct of Business rules which will require firms managing money on behalf of DC workplace pension schemes to disclose administration charges and transaction costs to the governance bodies of those schemes, using a standard approach.

With effect from 3 January 2018, in response to a request from the governance body of a relevant pension scheme, firms will be obliged to provide:

  • information about transaction costs calculated according to the “slippage cost” methodology;
    information about administration charges; and
  • appropriate contextual information.

Where firms do not have the relevant information, they must seek it from other firms, and those other firms, if they are FCA authorised, must provide the information.

The methodology for calculating transaction costs matches that required for products subject to the Packaged Retail and Insurance-based Investments (PRIIPs) Regulation.

14.09.2017 - Investment consultants to be referred to the CMA

As was widely expected, the FCA has confirmed its final decision to make a Market Investigation Reference (MIR) to the Competition and Markets Authority (CMA) in relation to investment consultancy and fiduciary management services.

Our note on the implications of an MIR, prepared at the end of June when the final report of the FCA’s Asset Management Study was published, can be found here

Note that the CMA will not only seek information from investment consultants themselves, but may also include their suppliers, including  fund managers.  Reportedly, some investment management firms have already been approached.