FCA’s Bailey Says Regulators Eager to Solve MiFID Research Snag

  • Banks, asset managers held meeting with FCA on MiFID solutions
  • Firms can ‘get stuck in the middle’ of EU, U.S. rules

FCA's CEO Discusses MiFID Research Snag

Regulators are working to find a solution for asset managers and banks that will be stuck between U.S. and European Union rule books when MiFID II takes effect in January, said Andrew Bailey, the U.K. Financial Conduct Authority’s chief executive officer.

Regulators on both sides of the Atlantic from the U.K., EU and U.S. are aware that the clock is ticking.

“This is an issue we have to solve before the end of this year,” the 58-year-old said in a Bloomberg TV interview Thursday. “We need to solve it in a pragmatic fashion, I don’t want to see firms left in the horns of a dilemma with: ‘Two sets of authorities pointing in different directions, what do we do?”’

Bailey said FCA representatives attended a meeting with the 40 biggest asset managers and banks that was aimed at seeking clarity on the financial markets overhaul.

The meeting “was really about one particular issue, and it’s about research,” Bailey said.

It’s one of the thorniest provisions in the revised Markets in Financial Instruments Directive, a sweeping update to an EU law known as MiFID: a requirement that brokerages charge managers for research, rather than offering it as a free perk. But the change conflicts with the U.S., where firms that charge clients for analysis can be deemed to be providing investment advice, meaning they’d have to comply with additional, costly, restrictions.

“Firms have rightly pointed out” that they can “get stuck in the middle of that,” Bailey said.

Read more about how MiFID II puts a price on investment research

Bailey said while the issue hasn’t been settled yet, “there are various things that might be done.”

For example, “there are discussions about the way firms organize themselves, this is a question about where the research is provided from,” he said.

Bailey also said a “high proportion” of firms will be ready for Jan. 3. The FCA has said it won’t be too strict on firms that don’t comply right out of the gate come January.

In a wide-ranging interview, Bailey also said:

  • Regulators are considering a transition period before implementing a new authorization system for non-U.K. banks after Brexit.
  • Planned expansion of the Premium Listing system would help sovereign-owned companies such as Saudi Aramco list in the U.K. because the structure wouldn’t require it to be in an index and “people don’t have to buy it.”
  • He says he doesn’t spend his time thinking about “what I want to do in the future” or replacing Mark Carney as governor of the Bank of England.
  • “I’m happy doing this job and I think Mark is happy being governor.”
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