Some professional investors, who are subject to the new MiFID II rules from 3rd January, may be unclear about the status of Hardman research and, specifically, whether it can be accepted without a commercial arrangement.
Hardman’s company research is paid for by the companies about which we write and, as such, falls within the scope of ‘minor non-monetary benefits’, as defined in the Markets in Financial Instruments Directive II.
In particular, Article 12(3) of the Directive states:
‘The following benefits shall qualify as acceptable minor non-monetary benefits only if they are’ (b) ‘written material from a third party that is commissioned and paid for by an[sic] corporate issuer or potential issuer to promote a new issuance by the company, or where the third party firm is contractually engaged and paid by the issuer to produce such material on an ongoing basis, provided that the relationship is clearly disclosed in the material and that the material is made available at the same time to any investment firms wishing to receive it or to the general public;’
The fact that we are commissioned to write the research is disclosed in the disclaimer, and the research is widely available.
The full detail is on page 26 of the full directive, which can be accessed here.
Hardman & Co is not inducing the reader of our research to trade through us, since we do not deal in any security.
In addition, it should be noted that MiFID II’s main aim is to ensure transparency in the relationship between fund managers and brokers/suppliers, and eliminate what is termed ‘inducement’, whereby free research is provided to fund managers to encourage them to deal with the broker.