The UK Financial Conduct Authority (FCA) has published a final policy statement (PS25/4), together with an updated webpage and press release, on final rules extending the new payment optionality for investment research to pooled investment funds. The rules were consulted on previously and will allow fund managers to pay for investment research using a joint payment option for research and execution services, subject to a set of guardrails. The feedback was largely positive, although respondents recommended more flexibility around guardrails. In response, the FCA has amended its proposed guardrails on written policies, research budgets, cost allocation and disclosure.
To take up the payment option, fund managers are required to:
- Establish written policies on their approach to joint payments.
- Stipulate the methodology for how the research cost will be calculated and identified separately within total charges for joint payments.
- Establish a research provider payment allocation structure.
- Set budgets for the purchase of research with joint payments.
- Allocate the cost of research fairly to any funds they manage where the budget applies.
- Provide disclosure on joint payments.
- Assess the price and value of research periodically. Value will have to be assessed on a fund-by-fund basis.
- Be responsible for the administration of the accounts for purchasing research with joint payments.
When fund managers of authorised funds adopt joint payments, the FCA confirms that this will be considered a significant change, requiring notification to both unitholders and the FCA. The new rules, which came into force on 9 May, are set out in the Payment Optionality For Fund Managers (Investment Research) Instrument 2025. It makes amendments to the Conduct of Business Sourcebook (COBS) and the Collective Investment Schemes Sourcebook (COLL).
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