The Financial Conduct Authority published a statement on best execution compliance by investment firms. The statement sets out the FCA's findings from supervisory work on how investment managers deliver best execution for their clients. Best execution refers to the requirement on firms to obtain the best possible result for their clients when executing client orders. The FCA has found that many firms have not conducted a robust gap analysis since 2014 and have not addressed the issues highlighted in the FCA's thematic review on best execution and payment order flows (published in 2014). The FCA stated that it expects firms to take into account the findings in its thematic review as well as the asset management market study. The FCA intends to reconsider best execution in 2017 and will assess the steps that firms have taken to address gaps in achieving compliance with best execution requirements and how firms are intending to show that funds and client portfolios are not paying too much for execution. The FCA will consider taking further action against firms and/or individuals where best execution obligations are not being fulfilled.
In January 2017, the European Securities and Markets Authority stressed the importance of continued efforts to reach a high level of supervision with regards to best execution requirements, and urged national regulators to make every effort to ensure that firms would be compliant with the revised best execution requirements under MiFID II. MiFID II applies from January 3, 2018.
View the FCA's announcement.
View the FCA's thematic review on best execution and payment order flows.
View the FCA's asset management market study.
View ESMA's follow-up report.
