Where MiFID II ‘hard payments’ are permitted

The 20 non-EU countries where fund managers may find it easier to meet new rules about how securities research is paid for include Chile, Australia and South Korea, research shows.

The Investment Association and legal practice Dechert recently produced a list of countries outside of the EU where fund managers would find it either easier or harder to comply with new rules imposed within the EU about broker research payments.

They said the rules affect asset managers in over a third of the 33 non-EU jurisdictions studied, some of them key markets for Ucits funds.

Under the revised Markets in Financial Instruments Directive (MiFID II), firms that pass the cost of external stock and bond research to their funds must be able to split out these payments from execution – and the rule can affect how firms deal with broker research payments outside of the EU.

Out of 33 countries studied, the 20 countries that do permit these “hard payments” for broker research are: Australia, Azerbaijan, Bahrain, Brunei, Canada, Cayman, Chile, Colombia, Egypt, Japan, Jordan, Kuwait, Malaysia, Mexico, New Zealand, Qatar, Russia, Singapore, South Korea and Thailand.

The remaining countries where hard payments are not or are only partially allowed are: Bermuda, Brazil, China (P.R.C), Hong Kong, India, Indonesia, Israel, Oman, Peru, Philippines, Saudi Arabia, Taiwan, and the United States.

MiFID II has required the complete separation of payment for execution and research and it not only affects activities within the EU, but also situations in which managers have delegated asset management activities to jurisdictions outside of the EU.

©2018 funds europe

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