Asset managers will be able to continue using commission sharing agreements (CSA) under Mifid II, according to a European Commission document.
A widely debated aspect of Mifid II regulation has been the requirement to unbundle research costs, which has been a particular worry for smaller asset managers.
However, according to a document seen by Reuters, the European Commission has changed its stance on the requirement and is looking to adopt a more flexible approach.
Under the current proposals, asset managers will have to pay directly for research from broker firms so it cannot be considered an inducement. The use of dealing commission for research and access to analysts will therefore be banned when Mifid II is introduced in January 2017.
The new document, which is still in draft stage, said that CSAs will not face a ban, subject to certain conditions, where a single payment can continue. As long as the arrangement includes a breakdown of the charges, asset managers will be able to continue paying for research and broking through CSAs.
‘Every operational arrangement for the collection of client research charge, where it is not collected separately but alongside a transaction commission, has to indicate a separately identifiable research charge,’ the document noted.
Earlier in the year, think tanks New City Initiative (NCI) and Open Europe warned that an outright ban of dealing commission to help pay for external research would disadvantage smaller managers who are unable to afford the extra costs.
The NCI also criticised the Financial Conduct Authority’s support of unbundling and recommended that the proposal be dropped and an alternative means to offer transparency to investors found.