Measures designed to ensure that the forthcoming implementation of new European trading rules don’t conflict with existing U.S. rules were announced Thursday by the U.S. Securities and Exchange Commission (SEC) and the European Commission.
The SEC issued three related no-action letters, which aim to make it easier for firms that operate in both the U.S. and Europe to comply with the SEC’s rules and the implementation of the European Union’s (EU) Markets in Financial Instruments Directive (MiFID II) on Jan. 3.
“The no-action relief provides a path for market participants to comply with the research requirements of MiFID II in a manner that is consistent with the U.S. federal securities laws,” the SEC says in its announcement. It also gives U.S. regulators time to assess how the investment business changes in response to the new European rules.
In particular, the no-action letters will allow broker-dealers, on a temporary basis, to receive research payments from asset managers in hard dollars, or from advisory clients’ research payment accounts. They will also allow money managers to continue aggregating orders for mutual funds and other clients, and to rely on an existing safe harbour when paying broker-dealers for research and brokerage.
“Today’s no-action relief was designed with input from a range of market participants to reduce confusion and operational difficulties that might arise in the transition to MiFID II’s research provisions,” says Jay Clayton, SEC chairman, in a statement.
“Staff’s letters take a measured approach in an area where the EU has mandated a change in the scope of accepted practice, and accommodate that change without substantially altering the U.S. regulatory approach,” he adds.
Also Thursday, the European Commission issued new guidance that aims to clarify how European investment firms can access brokerage and research services from foreign broker-dealers while remaining in compliance with their obligations under MiFID II.
“With the issued guidance EU firms will have greater clarity on how to deal with non-EU brokers that provide research. In this context, we welcome the decision of the staff of the U.S. Securities and Exchange Commission to simultaneously agree to relief for U.S. brokers supplying research to EU firms. Our co-ordinated action again shows the excellent EU-US co-operation in international financial regulatory matters,” says Valdis Dombrovskis, vice president in charge of financial stability, financial services and capital markets union, in a statement.