UK – UK pension funds are to get more disclosure about their asset managers’ trading commissions from next year, under new proposals put together by the industry and the Financial Services Authority.

Schemes will get so-called level two disclosure of the commissions from the first quarter of 2006, the FSA said. Level two disclosure should be made at least every six months.

The disclosure entails “client specific information on how commissions paid have been generated and how they have been used, including a split between commission spent on execution on the one hand and research on the other”

The FSA added there would also be “disclosure of the firm-wide pattern of trading and sources and uses of commission for all clients in that asset class”.

It said that since many investment managers already comply with the existing industry disclosure code for pension funds, they should be able to implement any changes at a “reduced cost and/or quicker pace”.

The move is part of proposals put together with the aid of the National Association, the Investment Management Association and the London Investment Banking Association on soft commissions and bundled brokerage.

Under the proposed rules, asset managers' use of commission should be limited to the purchase of 'execution' and 'research' services.

"The rules, combined with the industry-led proposals to deliver additional disclosure, address the issues of transparency and accountability raised by soft commissions and bundled brokerage arrangements,” said Hector Sants, managing director of the FSA's Wholesale Business Unit.

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