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Revised UK rules for bundling payments for investment research now in force
The FCA has recently revised the rules governing how buy-side firms, such as asset managers, are permitted to pay for investment research when purchasing this from sell-side firms such as brokerages.
Previously, 'bundling' payments for investment research together with trade execution payments had been prohibited, with only some very narrow exceptions available that, in practice, had found very low take-up. This prohibition originates with MiFID II, and was brought in amid concerns that payment bundling in this manner was bringing about consumer detriment.
However, this position has been revisited in light of what the FCA has identified as potential anticompetitive effects on both the buy- and sell-sides resulting from the prohibition. Following a consultation in the first half of the year, the new rules came into effect on 1 August. These rules revert, substantively, to the pre-MiFID II position, and again allow firms to bundle payments for trade execution and investment research together, subject to a series of 'guardrail' requirements which the FCA hopes will prevent and/or mitigate any potential consumer detriment.
The team reported originally on the consultation proposals here, and reported on the finalised rules here.
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