SEC clears path to US research post-Mifid

The Securities and Exchange Commission (SEC) has announced that UK investment firms will be able to temporarily access research from the US post-Mifid II.


In response to fears that investors could lose access to valuable US research, the SEC issued ‘no action relief’ for a 30-month window after Mifid II comes into effect in January 2018.

The measures taken allow investors to comply with the research provisions of Mifid II in a manner that is consistent with the US federal securities laws on a “temporary basis”. The SEC said brokers and dealers “may receive research payments from money managers in hard dollars or from advisory clients’ research payment accounts”.

Jay Clayton, chairman of the SEC, said: “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.

“These steps should preserve investor access to research in the near term, during which the Commission can assess the need for any further action.”

The announcement on Thursday followed consultation with European authorities, including the European Commission, which Clayton said “has been instrumental to the SEC’s efforts”.

“We look forward to continued dialogue on this and other important issues,” he added.

 The SEC’s update was welcome news to the Investment Association (IA) which has been vocal about resolving the issue of cross border research costs and ensuring a solution was found ahead of the January deadline.

Chris Cummings, chief executive of the IA, said: “The SEC has issued three related no-action letters addressing different aspects of the US regime. In parallel, the Commission has issued an FAQ on Mifid II interaction with third country broker-dealers.

“We will now review the details, but it is clear that this package of measures addresses a key outstanding challenge for our industry with regard to the implementation of Mifid II.”

A sigh of relief

During the period of temporary relief, staff will assess the impact of Mifid II’s research provisions on the marketplace in order to determine whether any further action is needed.

Patrick Shea, head of global compliance at Cordium, said: “The three no-action letters issued today by the SEC, following consultation with EU regulators, will enable some US registered broker dealers and money managers to breathe a sigh of relief when it comes to managing the unbundling of research.

“Although the investment management industry expected that the relief would come, the release of the no action letters provides certainty as firms with US regulated activities and an EU nexus confirm Mifid II readiness.”

US bankers and brokers were increasingly concerned and had been hoping for some relief with passing on research costs without registering as investment advisers.

Chris Turnbull, co-founder of Electronic Research Interchange, said: “This change has been made with a clear focus on investors’ best interests. While the relief is temporary, we expect solutions that enable firms to access research which benefits their clients – no matter the source – will be maintained.”


Latest Stories