European regulators had left a way for brokers to distribute, free of charge, research on companies that retained their services. This was designed to prevent the amount of research on small and medium-sized companies drying up. Fund managers, though, have been wary of using free brokerage services. They point to one of the main principles of MiFID II being increased transparency — and making fund companies pay directly for research.
Analysts say large asset managers have refused to accept services and research from brokers unless they have a transactional relationship with them. The amount of research on small and medium sized companies has fallen significantly since the introduction of MiFID I in 2007. A fifth of the UK’s 2,000 smallest public companies have no coverage. The European Commission is consulting on how to improve the regulatory environment to support listings of small and medium-sized companies. It is due to give its findings by the end of the year.
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