Published: 27th March 2013

There have been a few press articles recently on ‘corporate access’ and the possibility of the FSA taking action against asset managers that use clients’ money to pay for such access. The subject also features in the FCA Business Plan – see earlier article.

As mentioned in Regulatory Roundup 46 the FSA published “Conflicts of interest between asset managers and their customers: Identifying and mitigating the risks” last November (some firms may have been sent this publication by the FSA along with a ‘Dear CEO’ letter).

Chapter 3 was devoted to the purchase of research and trade execution services. COBS 11.6 reminds us that broker charges should only relate to the execution of trades or research and goes on to set out examples of what shouldn’t be bundled into commission charges e.g. travel, accommodation and entertainment costs or costs related to price feeds.

Criticisms in the Dear CEO letter included firms not checking whether services were eligible to be paid for in customers’ commission charges. It was particularly critical of firms paying for corporate access to key individuals in a firm e.g. chief executive by way of commission.

The footnote to 3.2 explains:

“Access to company management (sometimes also referred to as ‘corporate access’) means, in this context, the practice of third parties (typically investment banks) arranging for asset managers to meet with the senior management of corporations in which the asset manager invests, or might subsequently invest, on behalf of customers. It does not refer to any research services that might be provided by the third party alongside providing access to company management.”

Paying for such access is not necessarily a regulatory matter, but payment by way of commissions is, according to current FSA thinking, a regulatory matter.

The Investment Management Association recently published a paper on this topic – welcoming comment from “any interested parties” – which may be of interest. The link provided will take you to its website (use the search facility for ‘corporate access’).

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