In a post-Brexit boost to the City, EU rules on research into stock markets that support Britain’s £9 trillion (£9 billion) money management industry are being scrapped.
The Financial Conduct Authority is currently consulting on plans to eliminate laws that force fund managers to pay for separate research on UK listed companies.
In 2018, EU regulations prohibited stock brokers from “bundling”, or combining, their research with a trading service package sold to fund managers.
The FCA stated that the current system is too complex and disadvantages smaller fund managers.
A lack of research has contributed to the current malaise in the UK stock market.
The new proposal will combine the research and trading fee into a single payment.
Sarah Pritchard is an FCA Director. She said, “High quality, easily accessible research on investments is vital to a dynamic, healthy capital market.” It helps investors to make informed decisions.
We propose to offer more options for paying for research. This will help boost competition, and make it easier to purchase research across borders.
The regulations are part of Brussels MiFID II rulebook and were introduced at the beginning of 2018 just before the UK left the EU.
Previously, stockbrokers would provide free company research to fund managers.
Brokers reduced their research offerings as a result of the overhaul.
Fraser Thorne is the founder of Edison Investment Research. He said that the lack of investment research was a major factor in the current state of the City of London.
Asset managers and institutional investors are unaware of the opportunities available, while innovative firms remain in obscurity.
It will take longer for the EU to do so.
The City of London will have an advantage over the rest Europe thanks to the two-year process required to rewrite the rules and implement them across the 27 members trading bloc.
Mark Shaw, partner at Pinsent Masons law firm, stated: “The problem is that the majority of brokerages and banks have disbanded research departments since the research debundling regulations under MiFID II were introduced, so we are unlikely to see any immediate benefits.” This might slowly return in the future.”