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MiFID II Research Process Diagnostic

While the MiFID II research requirements continue to evolve, several important factors are clear.


- Monetary Research Budgets will be essential.
- Monetary Research Budgets will almost certainly be required at the fund level.
- The development of asset managers' research budget policies will be very firm-specific and the time to implementation will be significant, and proportionate to the complexity of firm.
- Many internal departments will have to be engaged in the process in order create a workable and compliant research budgeting framework.


Frost Consulting's Research Process Diagnostic is a streamlined analysis of the research procurement process allowing the rapid identification of potential MiFID II issues and suggesting potential solutions.

ESMA Technical Advice - December 2014

Summary - for more details/commentary enquire via

Technical Advice to the European Commission on MiFID II


ESMA (European Securities and Markets Authority) is the pan-European securities regulator. It was tasked with writing the technical detail for MiFID II, the pan-European securities regime which will commence from January 2017. This paper has been prepared in light of more than 200 formal industry submissions on their proposed guidelines published in May 2014, which potentially proposed a ban on the use of commissions to fund research. There was significant opposition to that proposal from asset managers, investment banks, independent research producers and some European Regulators.

The UK FCA, which was pushing for ESMA to ban the use of commission for research, has publically committed to abide by the ESMA outcomes.


- The use of commission for research survives….BUT it is subject to new requirements including:
- The establishment of a ring-fenced Research Account from which amounts may be paid to 3rd party research providers. (This could potentially be funded via commissions and is well suited to the CSA structure - although this is subject to different interpretations - particularly by the UK FCA).
- A formal research budget pre-approved by all clients.


- After this very vigorous industry debate, further attempts to ban the use of commissions for research are unlikely to succeed.
- But, this substantially raises requirements around the research budgeting process to beyond the FCA’s already stringent standards
- Most asset managers’ processes are not currently meeting these proposed requirements.

Next Steps:
- There will be an industry consultation period on this document lasting until March 2, 2015.
- There will be an open hearing in Paris on Feb. 19th.
- This input will inform ESMA’s “Final” Final draft which will be sent to the European Commission by mid-2015

ESMA Final Report
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