07/07/2023 Given all the money and time spent to implement MiFID 2, it’s
somewhat bittersweet that the British government might be looking to axe the rules. Or, at
least, it has been reported that the Chancellor will embrace the findings of the review by
lawyer Rachel Kent, which would mean scrapping the certain bits of the legislation that
forced firms to separate the cost of investment research from trading expenses. Currently
the rule requires brokers to provide breakdowns for charges and separate costs related to
research from trading/execution costs. The move, reported by Bloomberg, is part of a wider
package of reforms that the government hopes will make the UK a more attractive destination
for financial services. The recommendations are said to form a key plank of the Investment
Research Review, a part of the Edinburgh Reforms that government hopes will drive growth and
competitiveness in the financial services sector. We’re yet to see any details but the
obvious question relates to complying with best execution requirements once you start
bundling research fees into the trading expenses. How do you comply with best execution
requirements if you can bundle up other charges into the price? Consumer Duty considerations
are also very relevant here particularly when it comes to price and value assessments and
consumer understanding. Answers to this might emerge soon – Chancellor Jeremy Hunt is said
to be ready to announce the changes at his Mansion House speech on Monday. Whilst efforts to
improve competitiveness of financial services in the UK is always welcome, as is any move to
improve the quality and reliability of research available to investors, it remains to be
seen whether there is anything behind the reports, or whether it offers a practical solution
given other considerations. It could actually add an extra layer of complexity for firms.
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