It’s hard to keep track of the regulatory developments in the research market at the moment, with the SEC no-action expiry looming, the UK launching its review of MiFID II and Europe looking to shake things up too, here’s a small excerpt from our latest client update on the regulatory situation…
1. The UK’s Investment Research Review:
- The key topic that we suspect they will explore will be whether regulatory permission to rebundle research and execution could make a difference in practice. Asset managers fear that end investor clients would resist and no good would come from opening up the fees conversation, so this needs to be answered within this review.
- If rebundling isn’t going to energise the UK’s research market, are there other reforms that could help attract listings and support SME liquidity and investment? Or is research not the answer?
- The Call for Evidence is out and can be found here – responses need to arrive by April 24th!
2. The SEC’s Discontinuation of the No Action Relief, which ends July 3rd 2023:
- Some large banks will now take payments through European entities for global research relationships. However, others are making stipulations on what can be covered depending on the footprint of each particular client. A selection of (often smaller) US brokers will be registered as Investment Advisors in order to be able to continue to take cash payments.
- It is unlikely that the SEC will extend the no action, and asset managers in Europe are prepared to cut some US brokers if there isn’t a payment solution in place.
- The no action relief debate has reopened the “pro-unbundling” case again in the States. Latest example here.
- Greater disclosure in the US when it comes to research budgets and costs is probably inevitable, whether it goes further than that is hard to predict!
3. The EU Approach to Rebundling
- It seems likely that the Listing Act will include the option to take bundled payments from asset managers that wish to rebundle. Much like the UK situation, asset managers are sceptical this will allow them to benefit from greater freedom’s because they don’t want to ask clients to take on this cost, even if it is small in comparison to the overall relationship.
Not since 2017 has the regulatory outlook in the research market been this uncertain – contact us here [email protected] or book a demo below to discuss gaining access to Substantive Research’s insights and data.