CP24/21: Investment research payment optionality for fund managers

Read CP24/21 (PDF)[1]

Why we are consulting 

We are setting out proposals to take forward the recommendations of the Investment Research Review (IRR) and feedback to the consultation paper on payment optionality for investment research (CP24/7)[2]. We propose to extend the new payment optionality to pooled funds. This will make it operationally more efficient for asset managers of different business models and sizes to take up the new payment option to pay for investment research.

Who this is for

Our proposals will apply to: 

• UCITS management companies. 
• Full scope UK Alternative Investment Fund Managers (AIFMs). 
• Small authorised UK AIFMs and residual collective investment scheme operators.  
• An investment platform provider.

Our proposals might be of interest if you are:

• An authorised fund manager. 
• An alternative investment fund manager. 
• A residual collective investment scheme operator. 
• A portfolio manager providing services to both professional and retail investors. 
• A depositary of authorised funds or alternative investment funds.
  An investment platform provider. 
• A financial adviser. 
• An investment consultant or a professional investment adviser.  
• An investor in authorised funds or alternative investment funds.  

Next steps 

Online response form[3]

Please respond by 16 December 2024.

We will consider all feedback. If we choose to proceed, we will aim to publish any rules or guidance in a policy statement in the first half of 2025.

Background 

In July 2023, the UK Investment Research Review (IRR)[4] set out recommendations to improve the investment research market. This included allowing additional optionality for paying for investment research. As a result, we consulted on and implemented rules to enable a joint payment option for firms if they could meet a set of guardrails. 

In July 2024, we finalised rules for a new option of paying for investment research (PS24/9)[5]. The new rules enabled MiFID investment firms who wish to buy research for their segregated mandates, to use joint payments for third-party research and execution services, provided firms meet certain requirements. The new option exists alongside those already available allowing firms additional flexibility.

We received feedback that we should allow the new payment option for other asset managers. This includes managers of pooled vehicles under the UK alternative investment fund managers directive (AIFMD) and undertakings for collective investment in transferable securities (UCITS) regime (fund managers).

So, we are consulting on proposed changes to the COBS 18 Annex 1 rules, and other related rules, allowing fund managers to purchase investment research with joint payments. Our proposals reflect rules introduced to COBS 2.3 but in the context of pooled funds.