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A group of US investors with $4tn in assets has called on regulators to require fund managers to disclose their spending on investment research, arguing the change is needed to avoid giving their European rivals an unfair advantage. The request made by the Council of Institutional Investors to the Securities and Exchange Commission responds to the changes in the research business that have followed last year’s passage of Mifid II, European rules that bar fund managers from paying for research with trading commissions, known as “soft dollars”. European fund managers responded by absorbing the cost of research, putting them at odds with US peers, who continue to use bundled commissions in line with SEC rules. This dynamic has US institutional investors on edge. Many fear they may end up subsidising research used by fund managers in Europe.
The US securities regulator has also voiced support for fund managers that have crafted workarounds to the SEC’s own rules that allow them to pay for investment research directly, instead of through trading commissions.
Full article on Financial Times (subscription required)