As the SEC prepares to deal with the impact of MiFID II on U.S. markets, it should consider some guiding principles, the agency's investor advisory committee said Thursday.
While the committee often makes targeted recommendations to the SEC, the IAC's market structure subcommittee did not do so this time, given the numerous issues related to unbundling research and trading and multiple legal authorities that the SEC will have to deal with, it said.
Instead, subcommittee members said the SEC should focus on allowing consumers anywhere to choose whether to buy research bundled or unbundled from trading, and on protecting investors through three principles:
- Prioritizing investor protection, cost and choice in any compliance strategy.
- Considering all types of investors.
- Considering market participants of all sizes and geographies.
For now, the SEC has issued a temporary no-action letter that allows U.S. broker-dealers to comply with the unbundling, transparency, and hard dollar payment provisions of MiFID II for asset manager clients subject to it, without subjecting to them to investment adviser regulation. The letter is scheduled to expire July 3, 2020, and SEC members and staff are seeking input from the capital markets ecosystem.
"Given the complex and multipronged nature of this work, we recognize that the commission will require time to fully research and explore appropriate solutions," subcommittee members said in the recommendation. "We acknowledge that these goals are not likely to be fully achievable by July 2020 when the SIFMA no-action letter expires. But inaction is action and uncertainty creates disruption. Time is now very short and market participants need time to plan."