FCA consultation on the use of dealing commission rules – an NAPF response (February 2014)
The effective use of good quality research is of benefit to our pension fund members – the clients of investment managers – as they should benefit from the improved performance emanating from the use of this research in what is a highly competitive market. Furthermore, it is self-evidently in the interests of pension fund clients of investment managers that there is a competitive research market providing coverage of small and large cap stocks in local and global markets.
The NAPF is of the view that the current model for paying for research leads to the creation of too many conflicts of interests, an over-use of and over-supply of external research – not all of which is necessarily value-added – and a significant lack of transparency to clients.
Whilst the proposed changes to the rules on the use of dealing commission for purchasing research are positive, we do not believe that they will be sufficient of themselves to ensure that the interests of clients are adequately protected and served. Limiting the range of uses of dealing commissions is a helpful first step; however, the NAPF encourages the FCA to press ahead with its wider review.