MiFID II will put UK asset management firms at a disadvantage to firms in the rest of the world during the implementation of Brexit, New City Initiative says.
The think tank warns that the Brexit process will take time, MiFID II becomes law in January 2018 and the FCA has stipulated that all regulations must be complied with until Brexit is complete.
While the FCA’s Asset Management Market Study called for active managers to be more competitive on pricing, which the NCI supports, it warns some managers may increase management fees under the changed research purchasing rules in MiFID II, which risks putting UK fund managers at a competitive disadvantage to managers in the rest of the world.
US rules ban brokers from accepting research payments, the NCI says, as the Securities and Exchange Commission says this would classify them as being an investment adviser, which would restrict their trading abilities. This would mean UK fund managers who use US brokers would face conflicts between complying with MiFID II and US law.
Jonathon Read, head of policy at New City Initiative, says: “The NCI has always stressed the importance of maintaining the UK as a world leader in the asset management industry so that it can continue to promote innovation and consumer choice, while making a positive contribution to the UK economy.
“However, there is a very real risk that MiFID II research restrictions will put UK asset management firms at a competitive disadvantage to firms in the US and the rest of the world, which do not have to comply with the same EU regulations.”