Reports suggest UK set to scrap MiFID client research ban
Reports have emerged suggesting that Chancellor of the Exchequer Jeremy Hunt is set to announce an end to the MiFID II ban on free research for clients.
The move is part of a review into investment research carried out by lawyer Rachel Kent, two people familiar with the matter told Bloomberg recently.
The European regulation forced financial firms to separate the cost of investment research from trading expenses, in a bid to increase transparency and reduce conflicts of interests.
But the rules have been criticised for leading to a reduction in the amount of research available, with EU fund managers forced to cut their research budgets by a fifth in 2018.
The UK government said it commissioned the Investment Research Review because ‘Investment research can provide investors with information that can allow them to better understand a company’s business model, performance, and risks, and therefore to assess its value as an investment. It is used by potential investors who are looking to trade in both public and private markets to inform investment decisions. Low levels of investment research can make it harder to value companies, make it more difficult for companies to attract investors, and make UK markets less attractive to businesses looking to raise capital.’
According to the people said to be familiar with the matter, Hunt is likely to embrace the proposals made in the review including the creation of a new investment platform through which investors can access information on companies alongside a pre-public offering arena where firms can raise funds without a full initial public offering.
Lifting the ban on client research would form part of the UK’s attempts to move away from legacy EU rules and legislation after Brexit.