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British watchdog loses patience as asset managers flout fees rules
July 10, 2014 / 3:51 PM / in 3 years

British watchdog loses patience as asset managers flout fees rules

* FCA tells asset manager to repay customers

* Says only two of 30 businesses reviewed followed new rules

* Ready to back hardline reform to boost compliance

By Huw Jones

LONDON, July 10 (Reuters) - An asset management firm has been told to repay customers after using their money to settle its market data bill, Britain’s Financial Conduct Authority (FCA) said on Thursday, in a crackdown on commission charges.

The watchdog’s chief executive aknowledged that it is losing patience with firms that fail to comply with stricter rules imposed to help safeguard the UK’s position as a leading centre for asset management - a sector crucial to government efforts to encourage more people to save for their old age.

British asset managers pay brokers about 3 billion pounds ($5.1 billion) a year in dealing commission, which is passed on to customers, but FCA investigations found that many firms have been using this as cover to get customers to pay for market data and research of questionable value.

Only trading fees and useful research can be passed on to customers as dealing commission, but the watchdog’s CEO Martin Wheatley said the review of 17 investment managers and 13 brokers found that only two investment managers were fully in line with the new rules.

“We are in active discussion with one firm on redress for clients after we found it used dealing commission to pay for market data services in full, despite clear statements that this was not consistent with our rules,” Wheatley said.

Given poor compliance with the regulations, Wheatley said that the FCA is now backing a European Union law to separate research and trading fees to encourage greater competition and transparency.

Britain must comply with EU law in any case, but in the past the watchdog had been willing to “work with the grain of an industry-led solution”.

“The UK is a global centre for asset management - to keep this position it is crucial that investors are confident that they get a fair deal,” Wheatley said.

The Investment Management Association sought in February to head off a tougher regime by issuing its asset management members with guidance on dealing commission.

It said on Thursday that it is considering the FCA review and remains committed to supporting a regime that operates in the best interests of investors.

On Wednesday the FCA launched a wide-ranging review of competition in wholesale financial markets, which will also take in investment firms. ($1 = 0.5877 British Pounds)

Editing by David Goodman

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