Research Payment Reform Underway
The Financial Conduct Authority has announced a key regulatory change with the publication of PS25/4. Fund managers in the United Kingdom are now allowed to choose how to pay for investment research. They may use their own capital through profit and loss accounts or rely on client money via research payment accounts. This change reintroduces a degree of flexibility that had been curtailed under MiFID II and signals the regulator’s intent to strengthen the global appeal of UK financial services.
While this creates new opportunities, it also presents serious governance and operational implications. Fund managers must revisit client agreements, enhance disclosure obligations, and revise internal policies to comply with the Financial Conduct Authority’s requirements. In particular, the Financial Conduct Authority has deemed this a significant change for funds, which allows implementation through a 60 day notice period instead of full client consent. However, managers of segregated mandates must secure client consent via an amendment to the investment management agreement.
Cleveland&Co is helping clients adjust to these developments by reviewing research procurement frameworks, revising client communications, and setting up value for money assessments. We are also designing operational plans to support dual track payment models. If your firm is considering a new approach to research funding, now is the time to act. Contact us to discuss tailored strategies.
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