On October 26, 2017 the Securities and Exchange Commission (SEC) announced that it would permit Wall Street thirty months to comply with new EU regulations regarding research rules.
MiFID, the Markets in Financial Instruments Directive (2004/39/EC), was enforced in the European Union in November 2007. “It is a cornerstone of the EU’s regulation of financial markets seeking to improve the competitiveness of EU financial markets by creating a single market for investment services and activities and to ensure a high degree of harmonised protection for investors in financial instruments.” MiFID II was adopted as a new EU directive on June 12, 2014 to “improve the functioning of financial markets making them more efficient, resilient and transparent.”
MiFID II, to be enforced by January 3, 2018, restructures the research requirements for all market participants, which also impacts U.S. brokers and investors. The SEC devised three “no-action letters” to give U.S. market participants guidelines on how to abide by both EU regulations and U.S. federal securities laws and help firms understand and implement the regulations. The SEC’s plan enables U.S. firm’s with clients in EU states to continue operating in the U.S. and for EU investors to have access to U.S. data and research. The SEC’s guidelines include the following terms and conditions:
“(1) broker-dealers, on a temporary basis, may receive research payments from money managers in hard dollars or from advisory clients’ research payment accounts;
(2) money managers may continue to aggregate orders for mutual funds and other clients; and
(3) money managers may continue to rely on an existing safe harbor when paying broker-dealers for research and brokerage.”
The new regulations will create greater transparency and efficiency as broker-dealers will have to receive research payments separately, instead of being bundled with other services. This will ultimately provide a new standard of research as it will “incentivize brokers to produce better quality research” and it will create fair price competition. However, Quinlan & Associates have reported that these new measures will cut up to $240 million in business for a number of international investment firms, although it will establish a more fair and transparent market on a global scale. Due to the EU regulation’s initial conflict with U.S. securities laws, the SEC has granted a thirty month relief. During this time the SEC will continue to monitor how research on the market is conducted and whether the provisions need to be altered in any way. The SEC is accepting comments from the public on this matter on their webform.
 European Securities and Markets Authority. “MiFID (11) and MiFIR.” Available at: https://www.esma.europa.eu/policy-rules/mifid-ii-and-mifir. Accessed on Oct. 27, 2017.
 U.S. Securities and Exchange Commission. Press Release. (Oct. 26, 2017) “SEC announces Measures to Facilitate Cross-Border Implementation of the European Union’s MiFID II’s Research Provisions.” Available at: https://www.sec.gov/news/press-release/2017-200-0. Accessed on Oct. 27, 2017.
 Price, M. (Oct. 26, 2017) “U.S. Securities Regulator Grants Wall Street EU Research Rules Reprieve.” Reuters. Available at: http://www.reuters.com/article/us-usa-sec-mifid/u-s-securities-regulator-grants-wall-street-eu-research-rules-reprieve-idUSKBN1CV1SK. Accessed on Oct. 27, 2017.