The US Securities and Exchange Commission has announced a 30-month period of ‘temporary relief’ from new European Union investment research rules due to be introduced under MiFID II on 3 January 2018.
The move, which comes following consultation with European authorities, is in response to concerns that the under new EU regulations, US investors could lose access to valuable research. Under MiFID II, brokers will have to charge separately for research services which, traditionally, have been bundled with trading fees. The EU’s aim is to provide investors with greater transparency and encourage brokers to produce better quality research.
The SEC has now issued three related no-action letters, which are designed to provide market participants with greater certainty regarding their US regulated activities as they engage in efforts to comply with MiFID II.
The SEC says that the no-action relief provides a path for market participants to comply with the research requirements of MiFID II in a manner that is consistent with the US federal securities laws. More specifically, and subject to various terms and conditions, broker-dealers, on a temporary basis, may continue to receive research payments from money managers in hard dollars or from advisory clients’ research payment accounts, and money managers may continue to aggregate orders for mutual funds and other clients. Money managers may also continue to rely on an existing safe harbour when paying broker-dealers for research and brokerage.
“Today’s no-action relief was designed with input from a range of market participants to reduce confusion and operational difficulties that might arise in the transition to MiFID II’s research provisions,” says SEC Chairman Jay Clayton (pictured). “Staff’s letters take a measured approach in an area where the EU has mandated a change in the scope of accepted practice, and accommodate that change without substantially altering the US regulatory approach. These steps should preserve investor access to research in the near term, during which the Commission can assess the need for any further action. Cooperation with European authorities, including the European Commission, has been instrumental to the SEC’s efforts, and I welcome the additional guidance the EC published today. We look forward to continued dialogue on this and other important issues.”
