Festive Dinner

The Competitions and Markets Authority (CMA) has issued its final order in relation to its investigation into the investment consultancy and fiduciary management market. The order comes into effect in two parts. Most provisions are effective from 10 December 2019, giving trustees and managers time to prepare for the changes. The monitoring and compliance provisions (more on these later) came into effect on the date of the order (10 June 2019).

The government has reacted quickly and has already issued for consultation draft regulations implementing the Order – for the most part with no changes. The proposal is that regulations will come into force in April 2020. Notwithstanding the lack of regulations, trustees should note that the Order is legally binding until the CMA confirms that appropriate regulations are in place or other conditions have been met.

The key provisions of the order, which require trustees to take action, relate to:

  • Mandatory tendering for fiduciary management services
  • Setting strategic objectives for investment consultants
  • Submitting a compliance statement on an annual basis

Mandatory Tendering for Fiduciary Management Services

There is an immediate action for trustees to take if 20% or more of their scheme’s assets were under fiduciary management on 10 June 2019. Where that was the case, trustees will need to check the terms on which such arrangements were put in place. If any of the arrangements were not the subject of a competitive tender exercise, a tender exercise will need to be held in respect of the assets covered by the non-compliant arrangements.

The requirement to hold a competitive tender exercise will have been met where the trustees have used reasonable endeavours to obtain three bids from unrelated fiduciary management providers who are independent of each other. The competitive tender exercise must be held before the later of 10 June 2021 and five years from the commencement of the first agreement.

In a similar vein, where less than 20% of a scheme’s assets are under fiduciary management but the trustees wish to increase that amount to 20% or more, the trustees must carry out a competitive tender exercise in respect of both (1) the increment in assets and (2) any assets covered by an existing agreement that did not result from a competitive tender exercise.

Setting Strategic Objectives for Investment Consultants

Trustees must set “strategic objectives” for their investment consultancy provider on or before 10 December 2019.  This means setting objectives for advice, in accordance with the trustees’ investment strategy, in relation to:

  • Investments that may be made or retained by or on behalf of the trustees
  • Any matters in respect of which trustees are required by law to seek advice in relation to the preparation or revision of their statement of investment principles
  • Strategic asset allocation
  • Manager selection

Note that the draft regulations issued by the government refer to “objectives” only, so as not to confuse trustees into thinking that the objectives merely relate to investment strategy. The draft regulations also require trustees to review the performance of each investment consultant provider against the objectives at least every 12 months.

It would obviously be contrary to the spirit of the Order (which is all about conflicts of interest and how to protect trustees from the distortive effects of too concentrated a market) for investment consultants to draft their own strategic objectives. This is something, therefore, that trustees should be considering well in advance of 10 December 2019.

Monitoring and Compliance

Finally, a bit more about the monitoring and compliance requirements. Trustees, investment consultants and fiduciary managers must submit compliance statements within 12 months and four weeks beginning with the date on which each of the relevant parts of the order come into force, and annually thereafter. Effectively, this means that trustees will have to make their first compliance statement before 7 January 2021. While the Order sets out detailed requirements for making a compliance statement, the draft regulations instead propose that for trustees the compliance statement should be made to The Pensions Regulator via the scheme return.

If trustees are aware of any failure on their own part to comply with any part of the Order they must report such non-compliance to the CMA within 14 days of becoming aware of the failure to comply and provide a brief description of the steps taken to address the failure. The draft regulations are silent in this regard but of course any breach should be considered in light of TPR’s code of practice on reporting breaches of the law.


There is plenty for trustees to be thinking about. Although the festive season may feel like a long time away, for some trustee boards there may be only one trustee meeting available before 10 December 2019. It would make sense to start preparing now.