Andrew Bailey has spoken to the European Independent Research Providers Association on the subject of MiFID 2. He noted one guiding principle of MiFID 2 is to ensure that portfolio managers act in the best interests of their clients and are not unduly influenced by third parties. Additionally, both MiFID 2 and FCA have a drive to increase transparency, minimise conflicts of interest and improve conflicts management and promote competition by unbundling broker services.
He spoke of the context to the reform and the huge switch to managers funding research themselves, while a 2017 survey had shown around two-thirds of the buyside would look to charge clients for it. Dealing commissions have also fallen for a number of reasons, as have research budgets. FCA is pleased to note that the buyside can still access the research it needs, while the sell side is recognising that research is a valuable service in its own right.
Turning to MiFID 2 implementation, Mr Bailey explained FCA’s flexibility in allowing a transition period for the receipt of information, and its risk-based and reasoned approach to supervision. He also described the steps FCA had taken to ensure smaller companies were not disadvantaged by the restrictions the changes brought.
On the whole, FCA is pleased with the effects of the reforms, but recognises there is perhaps still some work to be done on appropriate pricing models so that independent research providers can properly play their role in the markets.