On Dec. 11, the Commodity Futures Trading Commission issued interpretative guidance addressing a potential compliance issue for intermediaries that do business with investment managers in Europe.
Starting on Jan. 3, investment managers subject to MiFID II will be required to unbundle their payments for investment research services from their payments for execution services. This raises a potential registration concern for intermediaries in the U.S. Previous statements by the CFTC have suggested that receiving a separate payment for research might require a firm to register as commodity trading advisor, regardless of that firm's existing registration status.
The guidance, which was requested by FIA on behalf of its members, provides that a futures commission merchant, swap dealer or introducing broker that receives separate compensation for commodity trading advice is not required to register as a commodity trading advisor, provided that the offered advice is “solely incidental” to the conduct of the FCM’s or SD’s business, or “solely in connection with” the operation of the IB’s business.
On Oct. 26, the Securities and Exchange Commission provided similar relief, issuing three no-action letters offering a temporary grace period to let U.S. brokerdealers and money managers meet the research-fee requirements of MiFID II without running into conflict with U.S. rules. "These steps should preserve investor access to research in the near term, during which the commission can assess the need for any further action," said SEC Chairman Jay Clayton.