MiFID firms conduct & organisational requirement - Thistle Initiatives

Written by Thistle Initiatives - Compliance consultancy | Dec 6, 2021 12:00:00 AM

What has happened?

In November 2021, the FCA announced, in its Policy Statement PS 21/20, changes intended to ensure that the COBS rules on research and best execution are better tailored and more proportionate to the risks arising.

What do you need to do?

The rule changes aim to improve the availability of research on SME firms by providing an exemption to the inducements rules that prohibit the bundling of research and execution fees. The changes made to best execution reporting are intended to relieve trading venues and brokers from preparing and publishing best execution reports that do not appear to benefit users.

The final rules will affect:

investment firms and market operators in the UK,
banks and operators of Collective Investment Schemes that provide investment services,
firms providing investment advice and reception and transmission of orders that did not opt into MiFID (‘Article 3’ MiFID firms), and
unauthorised persons providing research

In 2018, MiFID II introduced inducement rules governing the provision of research. These rules require research to be priced separately from other services, such as execution services. In CP 21/9, amongst other proposals, the FCA proposed the creation of an exemption from the inducement rules for research on SME issuers i.e. issuers below a market capitalisation of £200m.

From 1 March 2022, asset managers and research firms will be able to exempt the following from the inducement rules on research: research on SMEs below a market capitalisation of £200m, Fixed Income, Currency and Commodities (FICC) research, research provided by research providers that do not provide execution services and are not part of a group that includes a firm offering execution services, and openly available written research.

The CP also proposed deleting the obligations on execution venues and firms to produce RTS 27 and RTS 28 reports on the basis that these have not delivered on their objectives since they are little used by investors or firms with best execution obligations and are costly to produce. From 1 December 2021, MiFID firms will no longer be required to prepare RTS 27 and RTS 28 reports.

How can we help you?

If you’d like to know more about how we can help you with your MiFID firm’s investment research or order execution arrangements, or with any other regulatory compliance issues, our expert team is here to help.

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