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SEC Extends Temporary Relief for MiFID II-Compliant Research Payments

On October 26, 2017, the SEC staff issued a no-action letter providing relief to broker-dealers that provide research that constitutes “investment advice” under the Investment Advisers Act of 1940 to investment managers subject to the prohibitions on soft-dollar use imposed by the European Union’s amended Markets in Financial Instruments Directive (MiFID II), which took effect in January 2018. Under the relief, broker-dealers are able to receive payments for this research from investment managers paying their own money (i.e., “hard dollars”), from separate research payment accounts funded with client money or from a combination of the two. Absent this relief, a broker-dealer receiving these sorts of compensation for providing research that constitutes investment advice would be required to register as an investment adviser under the Advisers Act. The 2017 no-action relief was temporary and set to expire on July 3, 2020.

On November 4, 2019, the SEC staff extended for three additional years the temporary relief granted in the 2017 no-action letter. Accordingly, the relief will now expire on July 3, 2023 unless further action is taken. The SEC staff stated that the extension of the relief would allow the staff to further monitor and assess the effects of MiFID II on the market for research, including the effects of MiFID II on small- and mid-sized entities, and to consider whether additional guidance or recommendations are necessary. The SEC also noted that the additional time would enable EU regulators to evaluate the effects of MiFID II and consider modifications to their rules.

The SEC staff’s October 26, 2017 no-action letter is available here.

The SEC staff’s November 4, 2019 letter extending the 2017 relief is available here.

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Jacob Tiedt, Vedder Price, investment services attorney
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Jacob C. Tiedt is a Shareholder at Vedder Price and a member of the Investment Services group.

Mr. Tiedt’s practice includes the representation of registered mutual funds, closed-end funds and exchange-traded funds; private funds; investment advisers; and other financial institutions on a broad range of regulatory, governance and compliance matters. Mr. Tiedt regularly counsels clients on matters relating to SEC registration, disclosure and compliance; shareholder solicitation; NYSE, Nasdaq and FINRA regulation; corporate governance; and board administration. Mr....

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Legal, Business, John Marten, Investment Attorney, Vedder Price Law FIrm
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John S. Marten, a Shareholder in the Chicago office of Vedder Price, has substantial experience representing clients in the investment management industry.

As a member of the firm’s Investment Services group, Mr. Marten counsels clients on a wide variety of matters involving the application of the federal securities laws to investment companies, investment advisers and broker-dealers. He has significant experience counseling investment company clients with respect to new products and was recently involved in the creation of two mutual funds employing alternative investment strategies. Mr. Marten provides practical legal and business advice to investment company directors to assist them in fulfilling their fiduciary duties as directors, including extensive experience counseling directors with respect to Section 15(c) contract renewal matters.

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Nathaniel Segal, Investment Attorney, Vedder Price Law Firm
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Nathaniel Segal is an Associate at Vedder Price and a member of the Investment Services group. He focuses his practice on investment companies and investment advisers in connection with the organization and operation of investment products and services, including traditional mutual funds, closed-end investment companies (including interval funds and listed closed-end funds), variable insurance products and registered hedge funds, as well as mutual funds utilizing complex hedging and absolute return strategies. Mr. Segal has experience in conducting transactional due...

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John M. Sanders Investment Lawyer Vedder Price
Associate

John M. Sanders is an Associate at Vedder Price and a member of the firm's Investment Services group.

Mr. Sanders focuses on advising clients on mutual funds, private placements, sale transactions and regulatory issues.

While in law school, Mr. Sanders was a judicial extern for the Honorable David J. Novak, U.S. District Court for the Eastern District of Virginia and a law clerk with the Baltimore City State’s Attorney’s Office. He also served as Lead Articles Editor for the William & Mary Law Review.

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