The Investment Management Association (IMA), the trade association for UK Asset Managers, announced it has formed a blue ribbon panel to conduct a review of how research is paid for, and how the purchase of investment research could be improved. The panel is a response to recent regulatory concern about conflicts in the procurement of research.
The predecessor to the UK Financial Conduct Authority reviewed asset managers and published a scathing report at the end of 2012 which found issues with the commission management process in most of the firms reviewed. The headline topic was a challenge to the payment of corporate access with client commissions, but the broader context was that many asset managers were squandering their client’s commissions on research in an undisciplined fashion, according to the FCA’s predecessor.
The IMA, concerned that it not lose the ability to pay for research with client commissions, has set up an advisory group with final findings and recommendations to be published in a report in October 2013. One of the concerns of the IMA is negative press if research payments automatically rise as commission volumes increase, as was past practice.
The advisory panel will review the work being carried out by the IMA. The plan is for IMA staff to develop proposals to be included in the October report which the advisory panel will supervise.
The IMA will be holding a series of meetings with interested players in the industry, regulators, buy and sell side. The first public forum is scheduled for July 24th, and the agenda will include discussions on the topics of corporate access, commission management, and how research procurement could be improved.
Members of the panel include: Will Goodhart, who heads the CFA Institute in the UK; Glenn Bedwin, who used to run Fidelity’s commission management process (a process which was cited favorably in the regulatory report); Steve Kelly, the head of Thomson Reuters Extel; Neil Scarth, an ex-hedge fund manager who now runs Frost Consulting, consultancy we have quoted in the past; and Professor Tim Jenkinson, Professor of Saïd Business School, Oxford University. Professor Jenkinson is the non-executive Chairman of Oxera, the consulting firm which helped to prepare the FSA’s report on commission disclosure in 2008.
The IMA response shows that the industry has heard the regulatory concerns about commission management practices, and, while it may not forestall a followup regulatory review, the October report will presumably provide a baseline for the industry position on the topic.