IMA panel to probe soft commissions

The Investment Management Association has established an independent advisory panel to review the way fund manager research is paid for.

The panel will act as an advisory group to the IMA with final findings and recommendations to be published in a report in October 2013. Members of the panel include EuroIRP board member Glenn Bedwin, CFA UK chief executive Will Goodhart,, Professor of Saϊd Business School, Oxford University Professor Tim Jenkinson, Thomson Reuters Extel managing director Steve Kelly and Frost Consulting principal Neil Scarth.

The review was established in response to criticism of the practice common amongst fund managers of using so-called ‘soft commissions’ to pay for their research. Fund managers have been accused of opting for higher share trading costs that come with money for research bundled in. This research money is then used to pay the fund manager’s general costs of research for other trades. Because trading costs fall outside both a fund’s annual management charge and its total expense ratio, using soft commissions can make a fund manager’s charges look lower than they actually are.

Last November the FSA published a report that identified breaches of detailed rules governing the use of customers’ commissions and the fair allocation of trades between customers.
It also flagged concern that research paid for out of broker commissions was n

IMA director, institutional Guy Sears says: “It’s important that our review into research is credible and comprehensive so we’re pleased to have secured individuals of such high calibre and wide experience. This will help ensure the work we’re doing covers all the issues and meets our objective of constantly seeking ways to improve operating practices and client outcomes.”