European asset managers will soon be subject to a substantial disclosure regime now that Brussels has published its requirements for ‘delegated acts’.
The acts, which come in under the Markets in Financial Instruments Directive II, will oblige asset managers to reveal a range of costs and charging information to clients for services that management firms receive from third parties.
The European Commission has expressed concerns that payment for investment research to brokers could amount to an inducement. The acts state research will not be regarded as an inducement in two circumstances – when the investment firm pays for it directly from its own resources, or via a separate research payment account (RPA).
The latter route will impose a range of additional conditions for firms, including funding it by an individual research charge to clients, and regularly assessing the quality of the research they purchase using a robust quality criteria.
Clients will also be able to request a summary of which providers have been paid, the total amount they have been paid, and how this spending compares with the total size of an asset manager’s research budget.
Firms will not be allowed to pay more for research than their research budgets allow, and a research budget can only be increased once clients have been informed.
The acts can be read in full on the European Commission’s website.
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