<img src="https://certify.alexametrics.com/atrk.gif?account=b2hlr1ah9W20em" style="display:none" height="1" width="1" alt="">

research costs

MiFID II requires investment firms to demonstrate compliance with a wide range of new measures, building on the original MiFID from 2007.

Given that the deadline was pushed back a year from 2017 to 2018, the regulators are unlikely to accept the usual excuses about the lack of time.

Amongst the new requirements is one that could well be a game changer for investment managers, banks and research firms alike. It's the requirement for research costs to be unbundled from those associated with the execution of trades.

Before MiFID II, investment firms were able to factor the costs of providing research into the commissions payable to brokers, which meant that the investors were bearing the costs of the provision of this research to the fund managers.

MiFID II has changed this landscape, by requiring fund managers wishing to obtain research to either pay for it out of their own pockets (effectively from their profit and loss accounts) or by setting up specific research payment accounts funded by the clients.

Shifting shapes on research costs

The latter option theoretically is not too different from the current arrangements, as the client continues to pay for the research, but just in a more transparent and regimented way.

However, if a fund manager decides it wishes to shoulder the cost of obtaining research itself, then this could have a significant impact on the business models, and could eat into profit margins sunstantially.

Some managers have decided to take the hit and bear the cost, whilst others will want to put in place suitable agreements with their clients.

Whichever route is taken, there's a lot of work for investment firms of all sizes to do, in order to put their research houses in order.

Leave a comment

Tick

eBook: Essential Uncovered

Skillcast Essentials is our best-selling library and there's a reason for that. Essentials library provides comprehensive coverage of the key compliance / conduct issues that companies in the UK face today.

Request now

Making digital learning accessible for all

As companies become more mature about the use of digital learning for engaging employees, their priorities are shifting from visuals and animation to more fundamental features, such as ...

Read More
Compliance Essentials News - January 2019

In this first update of the year, we have for you an analysis of Google's GDPR fine as well as several other compliance developments and points to ponder. This blog is dedicated to bringing you the ...

Read More
A refresh on the need for new Data Protection Officers in light of GDPR

Editors note: This post was originally published in April 2018 and has been refreshed to provide additional information. Today, 28th January, is Data Privacy Day. The purpose of Data Privacy Day is ...

Read More
FCA Compliance News - January 2019

With Brexit preparations continuing apace, the financial services regulators have been busy through December and January. Our mission is to bring you these items of news that touch upon the people ...

Read More