SEC Chair Jay Clayton addressed the impact of the European Union's MiFID II research provisions on the availability of investment research to funds and their advisers.

In remarks delivered to the SEC Investor Advisory Committee, Mr. Clayton said that in 2017, the SEC issued temporary no-action relief to permit broker-dealers to receive hard dollar payments for research, to the extent required by MiFID II, without having to register under the Investment Advisers Act. Since then, Mr. Clayton noted, certain market solutions have been developed that may make it "unnecessary" to extend the relief beyond July 2020, when the temporary relief is due to expire. More generally, Mr. Clayton requested industry feedback on whether MiFID II had adversely affected the ability of investment advisers to obtain research.

Mr. Clayton also suggested that the SEC should refrain from imposing "rigid standards or metrics" on corporate disclosures concerning human capital. In additional remarks before the Advisory Committee, SEC Commissioner Elad Roisman stated that he favored a principles-based approach that gave issuers the "flexibility to provide material human capital disclosures that reflect the company's particular circumstances and provide investors the information needed to make informed investment and voting decisions."

Commentary / Mark Highman

The SEC is focused on how to address the impact of MiFID II on the provision of investment research to advisers and funds. Mr. Clayton's comments echo the views expressed in a recent speech by Dalia Blass, Director of the SEC's Division of Investment Management, in which she similarly noted that market solutions may make extending the MiFID II no-action relief unnecessary. Ms. Blass noted that the Division was "not yet convinced" of the need for a "permanent blanket exemption" from the Advisers Act to address the provision of investment research to institutional asset managers, and requested further information from the industry on whether targeted exemptions or regulatory guidance (e.g., addressing the scope of permissible payments under Exchange Act Section 28(e)) would be helpful. This is a good opportunity for broker-dealers that produce investment research and their investment adviser clients to engage with the SEC on this issue.

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