Numerous fund houses across Europe are struggling to ensure they will comply with the sprawling European directive, amid widespread uncertainty about the interpretation and application of 1.4m paragraphs of complex new regulations. “Mifid preparedness across Europe in general could best be described as patchy. A large number of companies will not be ready in January,” said Julie Patterson, head of the regulatory centre of excellence at KPMG, the professional services provider.
A key element of Mifid is a new regime on research payments, intended to end the opaque practice of managers receiving research for free from banks and brokers in return for placing trades with them. The majority of large asset managers have decided the simplest way of complying is to absorb the cost of research into their own profits. Several, including Man Group, Schroders and Janus Henderson, have reversed on earlier decisions to charge investors.
US regulators are soon expected to offer so-called no action relief to US broker dealers. This would permit broker dealers to pass on research costs separately from trading and execution charges, instead of bundling them together as has been their historic practice, without requiring these organisations to register as investment advisers that operate under stricter standards.
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