The Financial Conduct Authority is proposing to place a duty on asset managers to disclose aggregate transaction costs to pension schemes that, directly or indirectly, invest in their funds.
The FCA has also proposed that asset managers provide the breakdown of transaction costs on request with the total broken down into categories of identifiable costs, which could include specific costs like taxes and securities lending costs.
Currently, independent governance committees (IGCs) and trustees are required to request and report on transactions costs as far as they are able but asset managers are not required to provide full disclosure of these costs in a standardised form.
Officials said the new rules will “deliver a high degree of consistency in how transaction costs are reported and give governance bodies confidence that the information presented to them contains a comprehensive assessment of costs”.
Christopher Woolard, FCA executive director of strategy and competition, said: "IGCs are already seeking to make pension schemes work better for their members. The proposals we are announcing today will allow IGCs to see fully the transaction costs that their funds pay and enable them to make better decisions about how they get value for money for their members."
The FCA stated: “To ensure consistency across the market, the FCA also proposes that the calculation uses a methodology for evaluating transaction costs, called the slippage cost. This compares the price at which a transaction was actually executed with the price when the order to transact entered the market.
“The time an order enters the market should be captured by an order management system and this time can then be used to identify the price of the asset.
“Firms who are unable to provide transaction cost information for all of the assets in a scheme will have to disclose this clearly to the governance body with an explanation of why it has not been possible to provide the information.”
A consultation on the proposed rules is open until 4 January 2017.