SEC Commissioner Mark T. Uyeda is "disappointed that the SEC staff has decided not to extend the MiFID II Relief".

MiFID II Relief, allowed broker-dealers to receive separate payments for research without being subjected to regulation as investment advisers. This relief expired on July 3, 2023.

Source: https://www.sec.gov/news/statement/uyeda-statement-staff-no-action-letter-07-05-2023

https://www.sec.gov/news/statement/uyeda-statement-staff-no-action-letter-07-05-2023

Wut Mean?

Mark is big mad regarding the expiration of the MiFID II Relief, a no-action letter issued by the SEC staff. Here are the key points:

1. Mark tried to argue broker-dealer investment research plays a crucial role in providing analysis that helps investors understand regulatory disclosures from public companies, promoting price discovery, and contributing to the efficient market hypothesis.
2. In the U.S., asset managers typically pay for sell-side research through bundled client payments for brokerage commissions and research, known as “soft dollar arrangements.” However, in 2018, the European Union’s Markets in Financial Instruments package (“MiFID II”) required European and U.K. asset managers to pay for sell-side research from their own assets, or from a research payment account funded with client assets.
3. The MiFID II presented conflicts of law issues regarding how U.S. broker-dealers could be paid for research. To address this, the SEC staff issued a no-action letter, known as the MiFID II Relief, allowing broker-dealers to receive separate payments for research without being subjected to regulation as investment advisers. This relief expired on July 3, 2023.
4. Mark expresses disappointment that the SEC staff decided not to extend the MiFID II Relief to accommodate potential changes, especially as the European Union and the United Kingdom are considering easing the unbundling requirements to facilitate capital formation for smaller companies.
5. He is concerned that the expiration of the MiFID Relief will make it more difficult for U.S. broker-dealers to provide research. This could lead to an over-reliance on less credible sources, such as 'internet speculation'.
6. Uyeda calls for a holistic review of the regulatory framework.

TLDRS:

• In the U.S., asset managers (the folks who handle investments) usually pay for this research through a combo of client payments for brokerage commissions and research, aka “soft dollar arrangements.” But in 2018, the EU said that European and U.K. asset managers had to pay for this research from their own pockets or from a client-funded account.
• This EU rule (MiFID II) caused some legal headaches about how U.S. broker-dealers could get paid for research. So, the SEC staff gave them a break (the MiFID II Relief) that let them get separate payments for research without being treated like investment advisers. But this break ended on July 3, 2023.
• Mark is worried that without the MiFID Relief, it'll be harder for U.S. broker-dealers to provide research. He thinks this could lead to us relying more on less trustworthy sources, like 'internet speculation'.

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