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Report: Large Asset Managers Lobbying for U.S. Adoption of MiFID II Provisions

The Financial Times is reporting that Wells Fargo and Invesco, prompted by the European Union’s MiFID II requirements, have held meetings with the SEC to discuss changing U.S. soft dollar rules, which generally prohibit brokers from receiving payments for investment research unless they are registered as investment advisers. The MiFID II rules require firms to unbundle research costs from the costs of buying and selling securities. According to the FT report, T. Rowe Price arranged the meeting with the SEC, which was attended by other asset management firms. T.  Rowe Price is among several firms that have agreed to absorb investment research costs internally. Other firms continue to pay bundled commissions to brokers and then reimburse clients, the FT said. The differences in the regulatory structures could mean that U.S. investors are funding firms’ research costs while European investors are not, according to the FT.  The SEC staff issued three related no-action letters in 2017 in response to concerns that U.S. investors could lose access to valuable research and to provide firms and other market participants with greater certainty regarding their U.S. regulated activities as they comply with MiFID II. The relief expires on July 3, 2020. SEC Chairman Jay Clayton last year called on firms to submit information on the effects of complying with MiFID II.  “[I]t is important to have data and other information about how MiFID II's research provisions are affecting broker-dealers, investors and small, medium, and large issuers, including whether research availability has been adversely affected,” Clayton said. 

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