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MiFID II Inducements & Research vs US SEC

Statement on MiFID II inducements and research

11 November 2019

On Friday the FCA published a statement relating to MiFID II inducements and research.

The US Securities and Exchange Commission (US SEC) has announced an extension of the SEC staff ‘no action letter’ which addresses potential conflict between US regulation and MiFID II, until 3 July 2023. (The existing relief period was due to expire next summer on 3 July 2020)

The FCA has announced it welcomes the SEC’s extension of no-action relief that relates to the Markets in Financial Instruments Directive II (MiFID II) inducement and research provisions.

This extension means that during the remainder of the current and extended period of no-action relief, broker-dealers subject to the US regime may receive payments for unbundled research from firms subject to MiFID II or equivalent rules of EU member states without being considered an investment adviser under US law. This will also apply to UK firms in the event that Brexit occur before or during the extended period.

The regulator’s own findings from a multi-firm review, published in September, found that the rules have improved asset manager’ accountability over costs therefore saving millions for investors.

It is expected that the FCA will carry out further work in the next 1-2 years to assess firms’ ongoing compliance with the rules and developments in market research.

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