Inspired by MiFID II, a practice that’s long been commonplace in credit is rapidly gaining traction in equities — and that’s making some investors uneasy.
With new European financial regulations shrinking buy-side wallets for research and brokers slashing their coverage list, many companies have found they have to pay to stay on the radar. That’s prompted financial firms from SEB AB to Kepler Cheuvreux to offer sponsored analysis, which the company being analyzed pays for.
While some would say investment banks’ equity research has always been mired in conflicts of interest, sponsored reports make that explicit. But undeniably it is filling a void in the wake of the EU’s Markets in Financial Instruments Directive, which indirectly shrank analyst coverage by making investors pay for research separately.