European investors and corporates are following the UK financial services regulator’s lead on corporate access rules, according to a former buy-sider who has set out to change the way corporates and institutions communicate.
Michael Hufton, founder and CEO of Ingage and formerly a fund manager at Polar Capital, has been touring Europe to promote his technology platform, which is designed to bring investors and corporates together without paying fees to brokers.
The Financial Conduct Authority (FCA) has proposed banning fund managers from using client money to pay brokers for setting up meetings with senior management teams at listed companies. Hufton said many European institutions and corporates believe the FCA is setting a lead that other regulators will soon follow.
“When I spoke to around 140 corporates at a conference in Germany recently, 75% said they were concerned or not aware of the fact that corporate access could represent a conflict of interest in their business,” he explained.
Of the same audience, 65% felt that the current model, where brokers set up meetings on their behalf, meant they were not reaching the investors they needed to.
Irish investors are also keen to adopt the higher standards being set by the FCA.
“In Dublin, we’ve been talking to a number of investors which plan to follow the FCA’s regulations on this due to the international nature of their business. I hope other investors in Europe will also do this,” Hufton added.
The Ingage platform, which launched in January this year to enable institutional investors and listed companies to arrange meetings and communicate more effectively, has seen significant growth in client numbers since launching with three corporates and a single asset manager, Fidelity.
It now has seven institutional investors on-board, including a mix of hedge funds, large long-only and small long-only clients. It has also signed up 12 corporates including three in the FTSE 100, with two more due to be onboarded soon.
Hufton told theTRADEnews.com he expects more firms will look to address potential conflicts of interest in their business model when the FCA publishes its next paper of the use of commission payments in May.
Corporate access was one of several issues tackled in an FCA consultation launched in November last year. The paper proposed banning payment for corporate access out of client funds, saying it was often not in the best interests of an asset manager’s clients and costing them a significant amount for little added value.
It stopped short of saying asset managers should pay for research from their own funds but said the research procurement process should be more transparent and the costs of research and execution must be separated. The FCA is expected to report on the results on the consultation in May.