Since the entry into force of the MiFID II financial market directive, fund companies usually pay themselves for studies and analyses that they obtain from third-party providers. This had unpleasant consequences – especially for small caps. Because of the new rules for paying for analyses, the equity research offer, among other things, has fallen sharply.

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Since the entry into force of the MiFID II financial market directive, fund companies usually pay themselves for studies and analyses that they obtain from third-party providers. This had unpleasant consequences – especially for small caps. Because of the new rules for paying for analyses, the equity research offer, among other things, has fallen sharply. In particular, the coverage for secondary values has fallen significantly. As a result, the responsible regulators in both London and Brussels are now considering a U-turn.

Britain: Returning to the Old World
For example, the British financial regulator FCA would like to facilitate the financing of studies and analyses by investment banks or analysis firms in the future by allowing these costs to be offset against executed securities transactions. With MiFID II, this had been prohibited, after all, it was associated with lack of transparency and conflicts of interest.

With this step, the UK is moving away from the separation of research and trade orders. After Brexit, the Mifid rules initially remained in force in the UK, but efforts were made last year to adapt them on the island. For example, it is planned that there should be more options for paying for research. The authority wants to draw up concrete regulations in the course of the first half of the year.

European Union: Back to the old model?
In the European Union, a proposal is also being discussed that aims to more or less return to the old model. According to Bloomberg, the member states submitted several reform proposals for Mifid to the EU Parliament back in June 2023, including a proposal to reverse the regulation on research costs.
The EU had already abandoned the strict linking ban in 2021. The mixing of research for shares with a market capitalization of less than one billion euros with trading orders was permitted again.