US regulator agrees deal with EU allowing brokers to dodge worst of MIFID II research rules

Brokers in the US can breathe a sigh of relief today, as the country’s securities regulator agreed with the European Commission a way for firms to work around hurdles posed by sweeping new EU markets reforms.

In a move which has been much anticipated by the industry, the US Securities and Exchange Commission (SEC) said it would allow brokers which provide research to asset managers in Europe to accept money for their research.

This change was prompted by the second Markets in Financial Instruments Directive (Mifid II), which is forcing European asset managers to pay a direct fee for research for the first time. They previously paid brokers a commission for their services, and received research effectively for free.

This old system worked well in the US, but the new Mifid II rules posed a problem for US brokers, who under their own laws were not allowed to receive “hard dollars” – or a specific payment – for research unless they registered as an investment adviser.

Instead they could only accept “soft dollars”, or a commission, for research that was given incidentally in their capacity as a broker.

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