It is likely that this will have far-reaching implications for investment firms and their employees for the way in which investment recommendations are presented to their clients, as well as how they are recorded and subsequently made available for clients. In turn, this could have an impact on the frequency and form of investment recommendations provided to buy-side firms.
Whereas MAD disclosures were designed to cover the more traditional, standardized, equity market ‘buy/hold/sell’ research template, the extension of MAR to include less standardized sales recommendations, which could include relative value plays between different securities, vastly increases the disclosure obligations of investment firms and their investment professionals. In particular, investment firms and their employees will have to record every single investment recommendation at the security and issuer level, and make the last twelve months of this data available whenever making new recommendations.
Given these onerous disclosure demands, it is reasonable to assume that this will not only impact the extent of investment recommendations firms provide to their clients (likely to be a significant reduction), but also the form in which they are made (via electronic media as opposed to voice). Furthermore, compliance with the regulation is likely to require significant investment in information technology as well as a high level of staff training. Particularly where investment firms are not already recording every investment recommendation, they may struggle to comply with new obligations when they come into force in July of 2016.
The regulation is projected to come into force on 3 July 2016.
Full briefing note
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