European investment banks may reduce the number of analysts they employ and some independent research providers may quit the market if draft European Union rules on how investment managers pay for research are enacted, according to Deloitte LLP.
Bloomberg News reports that EU regulators are seeking to break apart existing models of paying for trading and research to ensure that research isn’t used as an inducement to push other business to the provider.
Managers will be banned from taking such incentives from brokers under a revamp of EU financial-markets rules due to take effect in 2017.
In advice to the European Commission, the European Securities and Markets Authority proposed that portfolio managers only be able to accept broker research when they pay for it out of their own resources or from a separate account set up specifically for that purpose and funded by an explicit charge to their clients. The final shape of the regulations may become clearer in November, when Deloitte expects the commission to issue the rules.
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