LONDON — U.K.-based money managers may soon be barred from using client commissions to buy order-management systems.
This could put U.K.-based firms at a competitive disadvantage with their U.S. counterparts, said Kristi Wetherington, president and chief executive officer of Capital Institutional Services, Dallas. It also could cause accounting problems for multinational firms.
Last month, the U.K.-based Financial Services Authority, London, issued a consultation paper for brokers and asset managers to decide whether connectivity services and associated electronic systems could be paid for from client commissions. (In January, the FSA ruled that dealing commissions can only be used to pay for research and services related to execution of trades.)
In the paper, the FSA said client commissions were "not the appropriate charging or payment mechanism" for electronic networks, dedicated telephone lines and computer software, including order- and execution-management systems.
Until now there has been no specific decision on whether order-management systems can be paid for with commissions, said FSA spokesman David Cliffe. But if the FSA holds to its initial position, money managers running large books of U.K.-based business will be hit.
Last July, the U.S. Securities and Exchange Commission ruled that order-management systems could be paid for with client commissions.