Statement on MiFID II inducements and research

The FCA welcomes the US Securities and Exchange Commission’s (US SEC) extension of no-action relief relating to the Markets in Financial Instruments Directive II (MiFID II) inducements and research provisions.

The US SEC has announced an extension of the SEC staff ‘no action letter’, which addresses the potential conflict between US regulation and MiFID II, until 3 July 2023. The existing relief was due to expire on 3 July 2020.

During the remainder of the current period and the extended period of the no-action relief, broker- dealers subject to the US regime may receive payments for unbundled research from firms subject to MiFID II or equivalent rules of EU member states without being considered an investment adviser under US law. This will also apply to UK firms in the event of EU withdrawal before or during the extended period.

The FCA’s own multi-firm review findings published in September 2019 found that rules have improved asset managers’ accountability over costs, saving millions for investors. We will carry out further work in 12-24 months’ time to assess firms’ ongoing compliance with our rules and developments in the market for research.

Notes to editors:

  1. US SEC's press release and SEC staff no action relief letter.
  2. MiFID II permits an investment firm either to bear research costs directly from the firm’s own resources, or, if it chooses to charge clients for research, adequately to disclose and account for that expenditure to its clients.
  3. The FCA extended the MiFID II provisions on inducements and research by additionally applying them, for example, to collective portfolio managers subject to the Undertakings for Collective Investment in Transferrable Securities (UCITS) Directive or Alternative Investment Fund Managers Directive (AIFMD). The no-action relief continues to cover situations where payments for unbundled research are received from firms who are subject to the FCA’s extended application (as well as firms who are subject to MiFID II, or substantially similar national rules of member states).