The NAPF welcomes the FCA consulting on the issue of sponsor conflicts and indeed the FCA’s recognition of investor concerns with respect to the sponsor conflict regime. We believe it important that sponsors engender and maintain the trust and confidence of the ultimate consumers of their activities – the investors in the associated issuing companies.

Of particular concern is the view that the sponsor service is generally offered as loss-leading business commonly undertaken with a view to the considerable fees and commissions which may likely be garnered from subsequent transactional services. We believe that given the important role of the sponsor, their independence, real and perceived, should be considered paramount and thus other commercial arrangements between the sponsor firm and issuer client should be closely monitored and disclosed. Additionally, in order to maintain and encourage high standards of competence amongst sponsors there should be a competitive market for their services as there should be for broader advisory services; this requires more transparent pricing than occurs at present. Issues such as whether the sponsor service should be offered as a ‘loss-leader’ need to be actively considered in this context.