On December 20,MFA and AIMA submitted a joint response to the UK FCA’s third consultation paper on the implementation of MiFID II. In the letter, MFA and AIMA supported efforts by the UK and other EU regulators to draft the national implementing measures as close to the text of MiFID II as possible in order to enhance the likelihood of harmonisation across the European Union. In the letter, we recommended that:
- The FCA reconsider the impact of MiFID II rules on payment for research on fixed income markets and explore alternative approaches to ensure that clients are not left paying more for research and execution than they do currently;
- Investment managers should have the ability to pay a research provider according to the managers’ assessment of the value of research received – rather than operating under strict ex ante pricing models for research;
- Investment managers should be able to disregard unsolicited research material from unrelated third parties that they have not elected to receive. Furthermore, investment managers should be able ignore research from connected third parties which they have expressly stated that they do not want to receive;
- The FCA should work with its counterparts at ESMA level to deliver a consistent approach in respect of whether corporate access services are to be considered a minor non-monetary benefit;
- Regulators in the EU need to work with counterparts in other jurisdictions to address the implications of MiFID II for non-EU brokers (including, importantly, US broker-dealers) who provide research to EU investment managers;
- The FCA should not gold plate MiFID II client categorisation provisions and should allow grandfathering of clients whose status changes under MiFID II;
- Reporting under RTS 28 should come into effect from April 2019, rather than April 2018;
- The FCA should not extend MiFID II standards on best execution and reporting to AIFMs and UCITS managers in order to avoid inconsistencies between the UK approach and that of other Member States;
- FCA should provide further guidance to clarify the application of product governance requirements for firms that provide services to professional clients, with a focus on implementing the regime in a proportionate manner;
- ESMA should clarify that portfolio management is not covered by MiFID II provisions on product governance; and
- The FCA should not extend taping requirements to all discretionary investment managers and should preserve the exemption for DIMs in situations where their sell-side counterparties record calls.
