The FCA welcomes the announcements made today by the European Commission and the US Securities and Exchange Commission (US SEC) in relation to the MiFID II inducements and research reforms and their interaction with US regulation.
Andrew Bailey, Chief Executive Officer at the FCA, said:
“I am grateful for the constructive conversations with the European Commission and SEC over recent months, culminating in today’s announcements. The outcome represents a flexible solution that respects the integrity of both regulatory regimes.”
The clarifications provided by both the European Commission and SEC staff will address key concerns raised with the FCA by UK market participants. They ensure that firms can continue to access US research from 3 January 2018, while also maintaining the investor protection safeguards of the MiFID II regime.
In supervising the MiFID II inducements and research provisions, and cross-border practices by firms in this area, the FCA will focus on ensuring investors’ interests are advanced. Arrangements which comply with MiFID II and other jurisdictions’ rules, while enabling EU firms’ continued access to research produced by US and other non-EU jurisdictions are likely to be the best way of serving investors.
The European Commission and US SEC staff statements enable this. Arrangements in which a UK asset manager pays the EU entity of a broker for global research content, or research is circulated within a buy-side group, can also be an acceptable way of achieving this, provided that they do not influence the firm’s order routing decisions, execution costs and ability to act in its clients’ best interests.
We will continue to engage with firms on their implementation of MiFID II ahead of the 3 January 2018, and will monitor evolving market practices once the new rules are in effect to ensure compliance and evaluate the impact of the changes.
Notes:
- The European Commission’s statement and Q&As[1]
- The US SEC’s statement and SEC staff no action relief letters[2]
- MiFID II requires EU portfolio managers to either bear research costs directly from the firm’s own resources, or, if they choose to charge clients for research, adequately disclose and account to their clients for that expenditure
- FCA Policy Statement 17/14[3] confirmed the FCA’s final implementation approach and Handbook rules relating to the MiFID II inducements and research reforms