The UK government has suggested it intends to reverse the unbundling rules on the purchase of investment research laid out in MiFID II.
In his annual speech to the financial services industry at Mansion House, the UK Chancellor Jeremy Hunt previewed a series of reforms designed to cut regulation and make the City a more attractive capital markets venue.
In addition to planned reforms of the UK’s pension market, Hunt also stated the government would back plans to reverse the EU’s rules on investment research, as stated in the Investment Research Review written by City lawyer Rachel Kent.
The MiFID II regulations forced investment banks and brokers to unbundle company research from brokerage services. The idea was to make the purchase of company research more transparent and stop brokers from providing research for ‘free’ in return for brokerage business.
However, market participants have argued that the rule has reduced the amount of research made available to asset managers, especially small and medium-sized firms.
Any idea that the UK government’s move is designed to differentiate it from the EU should be weighed against the fact that the EU is already planning to loosen its restrictions on research and that the UK would be an outlier if it did not also look to amend or scrap the rule.
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