TheCityUK response to the FCA’s consultation on Payment Optionality for Investment Research

In CP 24/7, the Financial Conduct Authority (FCA) outlines its plans to implement new rules allowing payment optionality for investment research.

TheCityUK supports the reintroduction of payment optionality for research and urges the FCA to implement this change as soon as possible, in a practical manner. There are concerns that the proposed guardrails may be more onerous than those in other jurisdictions, potentially hindering significant adoption of payment optionality. Our submission provides a high-level cross-industry perspective on the FCA’s proposals.

Our key considerations:

  • A key test for the FCA’s proposed new regime will be whether or not it encourages firms to take advantage of the new optionality. To support re-bundling, the FCA is proposing to introduce a number of so called ‘guardrails’ to protect the interests of investors. For firms to adopt the new optionality, it will be necessary to ensure that the implementation of any such guardrails is proportionate and not overly burdensome, especially as they are more extensive than those in other jurisdictions.
  • The FCA’s proposed guardrails cumulatively impose numerous additional obligations on firms to support payment optionality. We encourage the FCA to consider whether or not all of these obligations are necessary, and whether these obligations place a greater burden on UK firms compared to the EU and US.
  • While the FCA has cited the number of firms using the new payment method as a key indicator of success, we suggest considering the wider objectives of the investment research reforms as part of the assessment of success of the new proposals.

Further careful calibration of the guardrails and the proportionality of the additional burden will be needed before implementing any changes. We look forward to continuing to work closely with the FCA on refining the UK’s regulatory regime for research.

To read our full submission, click ‘Read here’.