Best execution under COBS: what RTS 28 disclosures still require

Best execution has been a regulatory priority since MiFID II came into force in January 2018. The UK’s onshored version of RTS 28 — the Regulatory Technical Standard requiring investment firms to publish annual best execution reports — has created a disclosure obligation that many firms approach as a compliance formality rather than a genuine accountability mechanism. The FCA’s supervisory attention suggests that the gap between minimum disclosure and adequate disclosure is larger than many compliance functions have recognised, and that the accountability questions under SMCR for individuals responsible for best execution oversight are sharpening.

This article examines what RTS 28 actually requires, the most common deficiency patterns, the post-Brexit UK position, and what effective best execution governance looks like from a senior compliance leadership perspective.

What RTS 28 requires — and what it means in practice

RTS 28 requires investment firms that execute client orders to publish, by 30 April each year, a report covering the preceding calendar year. The report must identify the top five execution venues used for each class of financial instrument and provide an analysis of the quality of execution obtained. The obligation applies to firms executing client orders in their own name — it is distinct from, though related to, the best execution obligation under COBS 11.2.

The prescribed content under UK RTS 28 includes: the top five execution venues by trading volume for each instrument class; information on the quality of execution obtained including factors such as price, costs, speed, likelihood of execution and settlement, and size and nature of the order; summary information on how the firm has satisfied itself that it is obtaining the best possible result; information about any close links or conflicts of interest with execution venues; and whether the firm differentiated between retail and professional clients in its execution approach.

The practical challenge is that the format prescription does not determine the quality of disclosure. A firm can comply with the letter of RTS 28 while producing a report that tells the reader nothing substantive about how the firm actually achieves best execution. The FCA’s concern, increasingly articulated in supervisory communications, is with the latter rather than the former.

Where firms most commonly fall short

Generic narrative that does not evidence actual execution quality

The most common deficiency is an RTS 28 report that describes the firm’s best execution policy in summary terms without providing data or analysis that evidences execution quality. A report that states the firm uses leading execution venues and considers multiple execution factors provides no information about whether best execution was actually achieved. The FCA expects the report to contain analysis — not merely assertions.

Firms that do not monitor execution quality on an ongoing basis find it structurally difficult to produce an adequate RTS 28 report because the annual publication is supposed to summarise monitoring that should have been conducted throughout the year. Where this monitoring is absent, the RTS 28 report becomes an exercise in drafting plausible-sounding language rather than genuine disclosure.

Incomplete coverage of instrument classes

RTS 28 requires disclosure across all classes of financial instrument in which the firm executes orders. Firms frequently produce reports that cover the classes where execution is most straightforward — typically equities and funds — and either omit or treat superficially the classes where execution quality is harder to evidence, such as fixed income, structured products, or OTC derivatives. Where a firm executes orders in these classes, the omission is a direct regulatory deficiency.

No meaningful analysis of how execution factors were weighted

COBS 11.2 requires firms to take all sufficient steps to obtain the best possible result when executing client orders, taking into account price, costs, speed, likelihood of execution and settlement, size, nature, and any other relevant consideration. The relative weighting of these factors should depend on the characteristics of the client, the order, the financial instrument, and the execution venue. RTS 28 reports that describe all of these factors without providing any analysis of how the firm actually weighted them in the context of the orders executed during the year do not meet the disclosure standard.

Failure to distinguish between client categories

The RTS 28 requirement to indicate whether the firm applied different treatment to retail and professional clients is substantive, not a checkbox. Where firms treat all clients identically for execution purposes regardless of client category, this requires explanation. Where firms genuinely differentiate, the report should explain how and why. Reports that state differentiation exists without describing it are inadequate.

No connection between the RTS 28 report and the firm’s actual execution monitoring

An adequately governed best execution framework will have ongoing transaction cost analysis, execution quality reporting, regular review of execution venue performance, and periodic review of the best execution policy itself. The RTS 28 report should be a public summary of conclusions drawn from this monitoring process. Where the report cannot be traced back to an internal governance process — where it appears to be produced from scratch for the purposes of publication rather than drawn from ongoing monitoring — this suggests the underlying governance is deficient.

The post-Brexit UK position

Following Brexit, UK firms are subject to the UK onshored version of RTS 28 rather than the EU’s RTS 28. For most purposes the substantive content is identical — the FCA carried across the MiFID II framework as onshored legislation. UK firms are not required to publish RTS 28 reports for their EU business if they execute that business through an EU entity, but UK-executed business for UK and international clients remains within scope.

The FCA has not departed significantly from the EU approach on best execution. UK firms should not assume that regulatory divergence has reduced the obligation. The FCA’s conduct of business rules continue to require firms to take all sufficient steps to obtain the best possible result. The RTS 28 disclosure obligation continues to apply on the same annual cycle. The primary post-Brexit change of relevance to best execution governance is the FCA’s increasing focus on the Consumer Duty, which for retail clients creates an additional obligation to demonstrate that the firm is delivering good outcomes — of which execution quality is a component.

SMCR accountability for best execution

Under SMCR, accountability for best execution oversight typically sits with the SMF16 (Compliance Oversight) holder, although in some firms it is distributed between SMF16 and the individual responsible for investment management or trading operations. The accountability question is not merely who signs off the RTS 28 report — it is who is responsible for ensuring that the firm has the systems and processes to achieve best execution on an ongoing basis, and who is accountable if those systems are found inadequate.

The FCA has been clear that personal accountability under SMCR is not limited to situations where the individual had direct knowledge of a failure. A senior manager who did not establish adequate monitoring systems, did not ensure that best execution was reviewed periodically, or did not escalate concerns when transaction data suggested potential execution quality issues can be in scope for regulatory accountability even if they did not cause the failure directly.

This raises the bar materially for whoever holds accountability for best execution within a firm. It requires not just familiarity with the rules but the operational capacity to build and maintain a genuine best execution framework — one that produces data, requires decisions, and evidences its outputs in a way that would withstand regulatory review.

What effective best execution governance looks like

Firms with robust best execution frameworks typically share several characteristics. They maintain ongoing transaction cost analysis that allows comparison of actual execution against benchmarks. They have a formal execution venue review process — typically quarterly — that assesses whether the top five venues remain appropriate and whether the ranking has changed in ways that require explanation. They maintain a documented best execution policy that is reviewed at least annually and updated when the firm’s business or the market environment changes materially. They produce MI for the compliance oversight function that makes execution quality visible as a governance matter, not just an operational one. And they produce the RTS 28 report as an output of this governance process rather than as a standalone annual exercise.

The compliance resource requirement for this framework is not trivial. Firms that treat best execution as primarily a disclosure obligation tend to under-invest in the monitoring and governance infrastructure that makes adequate disclosure possible. The consequence is an RTS 28 report that is technically published but substantively inadequate, and a governance framework that will not withstand supervisory scrutiny.

The compliance leadership implication

Best execution is one of those regulatory areas where the gap between adequate and inadequate governance is largely invisible until a regulatory interaction makes it visible. Firms that have been publishing RTS 28 reports for several years without FCA comment should not assume those reports have been assessed as adequate — the FCA’s supervisory capacity means that many disclosures are not reviewed in depth until a firm comes under specific scrutiny.

The senior compliance leader — whether SMF16 holder, CCO, or Head of Compliance — who is accountable for best execution governance needs both the regulatory expertise to understand what adequate governance looks like and the operational credibility to build it within the firm. This is a role that combines technical knowledge of COBS 11 and RTS 28 with the standing to drive investment in transaction cost analysis infrastructure and the confidence to present execution quality MI as a governance matter to the board.

FD Capital places senior compliance professionals with the MiFID and COBS expertise that FCA-regulated investment firms need. Where the requirement is an SMF16 holder with direct experience of best execution governance, an interim Head of Compliance to lead a framework review, or a CCO who can engage credibly with the FCA on execution quality matters, we work exclusively in the regulated financial services space and understand the specific competency requirements.

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