UK Competition and Markets Authority Targets Anti-Competitive Practices in Investment Consultancy and Fiduciary Management Services

The U.K. Competition and Markets Authority has issued the Investment Consultancy and Fiduciary Management Market Investigation Order 2019. This is U.K. secondary legislation intended to combat anti-competitive practices in the supply and acquisition of investment consultancy and fiduciary management services to and by the pension schemes they advise. The Order was made on June 10, 2019 and enters into force on December 10, 2019. It follows the CMA's consultation on a draft version of the Order that was published for review by interested parties on February 12, 2019. In the final Order, the CMA has endeavoured to resolve a number of the issues raised in response to the consultation. These include amending the Competitive Tender Process as originally drafted by imposing a less stringent "reasonable endeavours" obligation on trustees who are required to obtain bids from three or more unrelated Fiduciary Management Providers, and excluding in-house investment advice or fiduciary management functions from the scope of the Order.

The Order imposes certain obligations and restrictions upon fiduciary management providers (i.e. firms that advise on and carry out investment decisions on behalf of pension scheme trustees) and investment consultants (i.e. firms that advise pension scheme trustees on appropriate investment decisions), as well as the pension scheme trustees that make use of their services.

In relation to fiduciary management providers, the Order: (i) restricts the extent to which a single fiduciary management provider may provide services to a pension scheme trustee by requiring that competitive tender processes are held for agreements covering 20% or more of a pension scheme's assets; (ii) restricts the marketing materials issued by fiduciary management providers (including imposing a prohibition on combining marketing of fiduciary management services in the same document as investment consultants' or fiduciary management providers' advice and requiring fiduciary management providers' marketing materials to contain specified information); and (iii) requires fiduciary management firms to provide information regarding fees and investment performance. The Order also prohibits pension scheme trustees from contracting with investment consultancy providers, unless they have established clear strategic objectives governing the services provided by the investment consultancy.

The Order imposes minimum standards on the information provided by both fiduciary management providers and investment consultancy providers on their past performance. It also entitles the CMA to issue directions to those subject to it and to impose injunctions or other appropriate remedies for any breaches of the Order. Pension scheme trustees, investment consultancy providers and fiduciary management providers will need to submit compliance statements annually to the CMA in respect of certain sections of the Order, confirming the extent to which they have complied with the Order.

View the Investment Consultancy and Fiduciary Management Market Investigation Order 2019.

View the CMA's Explanatory Note to the Investment Consultancy and Fiduciary Management Market Investigation Order 2019.

View the CMA's summary of responses to its consultation on the draft Investment Consultancy and Fiduciary Management Market Investigation Order 2019.

View the CMA's Final Report on its Market Investigation.

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