(Bloomberg) -- Fidelity International Ltd.'s decision on how to handle its research costs to meet new European rules hinges on how the U.S. deals with the regulations.
“The one sticking point is the U.S. because the U.S. securities industry doesn't get pushed around by anybody,” Richard Lewis, head of global equities at Fidelity, which manages $383 billion in assets, said in an interview in Singapore last week. “We'll have to wait and see what the U.S. regulators come up with.”
One quandary with the European Union's revised Markets in Financial Instruments Directive, known as MiFID II, is the requirement that brokerages are paid directly for research -- that conflicts with U.S. rules. The Securities and Exchange Commission has signaled to brokerages that it has increased efforts to find a solution before Europe's rules take effect in January.
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While the SEC does its due diligence, some of the world's largest money managers have started to make independent decisions. BlackRock Inc., Vanguard Group Inc. and Schroders Plc have said they would absorb research expenses.
Mulling Options
Fidelity is weighing between its preferred choice of having a global research base to meet MiFID II, or having two separate pools of clients and research, Lewis said.
The rules which come into force in January aim to tackle conflicts of interest by requiring money managers and hedge funds to be charged separately from trading fees. Lewis declined to comment if Fidelity would bill clients for research or absorb the costs.
The rules aren't just confined to within Europe and have a global reach including in Asia, much to the chagrin of his colleagues, he said.
Forty of the world's largest asset managers and banks held a summit in London with the Financial Conduct Authority last week to discuss how the rules may disrupt global operations, the Financial Times reported, citing an unidentified senior executive who attended the meeting. The participants failed to gain clarification from the U.K. financial regulator on the matter, the FT said.
--With assistance from Andrew Blackman
To contact the reporters on this story: Abhishek Vishnoi in Singapore at avishnoi4@bloomberg.net, Andrea Tan in Singapore at atan17@bloomberg.net.
To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Ross Larsen
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