11 May 2017

Blog: More MiFID Answers about Corporate Access

MiFID II will be in force within months. Amongst other effects, this Directive will radically alter the regulatory regime for the provision of both Access and Research. Brexit won’t change anything. The FCA was a big proponent of certain measures which are to be brought in by MIFID II and many of the larger institutions want to keep the UK’s regulatory regime as close as possible to what happens in Europe. So whether you are ready or not, MIFID II is coming into force in January 2018.

Despite time running out, many issuers and investment firms are still confused. So, in April the European Securities and Market Authority (“ESMA”) published a series of Questions and Answers about the main MIFID legislation and the delegated legislation under MiFID II for which ESMA is responsible.

Basically, though, insofar as MiFID II is concerned brokers need to unbundle the services that they provide to investment firms. Research cannot be paid through execution fees anymore. It must be separately invoiced. Corporate Access is a discrete service/benefit for investors. In turn, Corporate Access cannot be paid for from either execution fees or research.

Does this mean that brokers would have to charge investment firms separately for Corporate Access or cease providing such services? The answer is that almost certainly investment firms will be required to pay separately for Corporate Access provided by brokers despite so many investors indicating already their reluctance or refusal to so to do.

Alternatively, they may have to cease getting Corporate Access through brokers except in very particular circumstances. This is because, an investor providing investment advice cannot accept any non-monetary benefit. Corporate Access would usually be such a benefit. ESMA has issued a clear warning that investment firms need to be very wary here and “carefully assess” whether Corporate Access services such as individual meetings are material benefits. Indeed ESMA suggests that such individual meetings may have a benefit and that these may not be minor in nature. This would certainly be the case when so many investment firms cite the advantages and value of individual meetings in practice.

Capital Access is the leading independent provider of corporate access services in the UK. We have been advising and supporting issuers for over two decades. The good news is that the services provided by Capital Access are cost-effective and fully MiFID II compliant. We are only paid by issuers (though we liaise daily with very many investors on behalf of our client companies). Our fees are paid entirely by issuers. This is clearly allowed under MiFID II.

Using the Capital Access solution, investment firms don’t have to pay to gain access to companies or worry about making any assessment about whether they have accepted a non-monetary benefit illegally for access services. Most importantly, our issuer clients will continue to benefit from the access they need to investors across the board.