In the United Kingdom, the FCA has proposed to give fund managers (including UCITS Mancos and full-scope UK AIFMs) an option to use fund assets to pay jointly for execution and research (so-called ‘bundled’ payments). The existing options of paying for research from manager funds or operating a customer-financed research payment account would remain. Final rules are expected in the first half of 2025. This follows the introduction on 1 August 2024 of a similar option for separate account managers as discussed here.

Fund managers opting for joint payments will be subject to ‘guardrails’ like those for firms managing segregated mandates. The guardrails are intended to ensure client protection by (for example) requiring appropriate disclosure to clients and seeking to ensure that research spend achieves value for money for each relevant fund client. Managers of FCA authorised retail funds opting for joint payments would need to treat the matter as a ‘significant change’ requiring both prior FCA approval, and that unitholders are given at least 60 days’ prior written notice.

One reason why firms may wish to consider using the joint payment option is so that they can obtain research from US broker-dealers who may be unable to accept unbundled payments for research.

In the European Union, changes to MIFID under the Listing Act Directive are being implemented in EU member states by 5 June 2026. These will give MiFID investment firms (incl. separate account managers) an option to make joint payments for execution and research. Conditions will apply, including an obligation to assess the quality, usability and value of research used, but the current limitation to the effect that this option does not apply to research concerning issuers with a market capitalisation of over €1 billion is being removed.