REGULATION

Global buy-side firms to adopt MiFID II unbundling

Large buy-side firms will not be implementing separate strategies for different regions for research consumption.

By Hayley McDowell hayley.mcdowell@strategic-i.com March 14, 2017 12:18 PM GMT

Global asset managers with substantial business in Europe are opting to adhere to MiFID II’s unbundling rules, according to research.

A report from Greenwich Associates found large buy-side firms with a presence in multiple regions are looking to ‘lessen the burden’ of maintaining distinct research management processes in different parts of the world.

None of the US investment management firms surveyed said they would be implementing two separate processes for the US and Europe, due to the administrative burden and costs involved.

Associate director at Greenwich, William Llamas, explained: “By adopting this strategy, these firms will be importing MiFID standards into the United States - despite the lack of a regulatory directive.”

Asset managers under the jurisdiction of MiFID II were recently slammed by authorities in the UK for unbundling failures, with the deadline for implementing the new standards less than 12 months away.

The Financial Conduct Authority (FCA) visited several investment management firms and found the majority are inadequately assessing the costs and justification for research as required under MiFID II.

“We identified poor practices at the majority of firms we visited and several could not demonstrate meaningful improvements in terms of how they spend their customers’ money through their dealing commission arrangements,” the FCA said.

Furthermore, a separate survey published in January found buy-side firms are underprepared and not entirely sure of their unbundling obligations.

Over a third of buy-side respondents stated they are not confident of being ready for implementing the unbundling rules - due to come into effect on 3 January 2018.

The TRADE will be in New York on 28 March for its latest MiFID II pop-up event. Topics of discussion will include how unbundling will affect the rest of the industry and its impact on full service and agency brokers.

To register to attend this event, please click here.