U.S. Shields Wall Street From MiFID Threat to Research Business

U.S. Shields Wall Street From MiFID Threat to Research Model

(Bloomberg) -- The U.S. Securities and Exchange Commission will blunt the impact of new European financial rules on Wall Street after American brokerages warned the changes threatened their investment research businesses.

The SEC took the unusual step of providing formal assurances for 30 months to an entire industry that it won’t object if firms break out the cost of market analysis for their European clients, rather than bundling it together with trade execution services as many currently do. Europe is requiring that brokers charge separately for research from January, but doing so conflicts with U.S. regulations.

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

At issue is Europe’s coming ban of a practice that has been routine at global banks for decades: Issuing fund managers one bill for everything from executing trades to analyzing stocks and bonds. Europe’s goal is to give investors more transparency into how much they pay for specific services, while incentivizing brokers to produce higher-quality research.

“We welcome the decision of the staff of the U.S. Securities and Exchange Commission to simultaneously agree to relief for U.S. brokers supplying research to EU firms,” Valdis Dombrovskis, the EU’s financial-services policy chief said in an earlier statement on Thursday. "With the issued guidance EU firms will have greater clarity on how to deal with non-EU brokers that provide research.

The decision represents a major victory for many U.S. brokerages scrambling to prepare for the EU’s revised Markets in Financial Instruments Directive, or MiFID II. The firms said that they were concerned that selling research to European clients could have forced them to register as investment advisers, adding additional costs and resulting in stricter SEC oversight.

The SEC will ask the public to make their views known on the impact of MiFID over the next year.

To contact the reporters on this story: Ben Bain in Washington at, Silla Brush in London at

To contact the editors responsible for this story: Jesse Westbrook at, Neil Callanan, Andrew Blackman

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