FCA outlines tighter unbundling rules 

RPAs can be funded through CSAs, but brokers can no longer retain money intended to pay for research.

Under MiFID II rules, research payment accounts (RPA) are allowed to be funded by commission sharing agreements (CSA), although CSA cash cannot be retained by brokers to pay for research.

A consultation by the UK’s Financial Conduct Authority (FCA) has stated research charges deducted through a broker – alongside transaction fees – should be ‘swept’ to an RPA immediately following the transaction.  

However, if the research passes through an executing broker, RPA money flows must be ‘ring-fenced’ and separately identifiable.

Chief executive officer at independent research provider ResearchPool, Pedro Fernandes, explained the process the FCA outlined is ‘robust’. 

He added: “If [holding CSA money] was possible, it would eventually become a barrier to unbundling, so it creates a level playing field amongst research providers.”

Co-founder of RSRCHXchange, Vicky Sanders, explained “the FCA has left very little wriggle room.”

She added: “The FCA implementation of MiFID II will ensure that a transparent, priced research market emerges and that research becomes a core and fixed cost of doing business.”

The FCA has requested comments on any suggested modifications to RPA rules from the consultation by 4 January 2017.

It will provide feedback in the first half of next year.