EU rules on stock market research underpinning Britain’s £9 trillion money management industry will be scrapped in a post-Brexit boost for the City.
The Financial Conduct Authority (FCA) is consulting on plans to remove laws forcing fund managers to pay separately for research on UK-listed companies.
EU rules prevented stock brokers from “bundling” their research into a package of trading services sold to fund managers in 2018.
The FCA said the current system was too complex and disadvantaged smaller fund managers.
The system has also been blamed for the current malaise on the UK stock market, with a lack of research contributing to less investment in UK stocks.
Under the new proposals, research and trading fees will be combined in a single payment.
Sarah Pritchard, an FCA director, said: “High-quality, easily accessible investment research is a vital part of a healthy, dynamic capital market. It supports the decisions investors make.
“We are proposing to provide more options on how to pay for such research, helping boost competition and making it easier to buy research across borders.”
The regulations were part of Brussels’ MiFID II rulebook, which were introduced in early 2018 before the UK quit the EU.
Before this fund managers would get their company research for free from stockbrokers.
The overhaul led to a dearth of research on UK companies, as brokers cut back on offering research.
“One major reason for the City of London’s current malaise is a dearth of investment research to inform decisions,” said Fraser Thorne, founder of Edison, the investment research firm.
“Asset managers and institutional investors remain unaware of the breadth of opportunities, and innovative new firms are left to languish in obscurity.”
The EU is also planning to scrap the rules but it will take longer.
A two-year procedure required to rewrite rules and enact them across the 27 member trading bloc means the City will get a head start on the rest of Europe.
Mark Shaw, a partner at the law firm Pinsent Masons, said: “The problem with this reversal is that most brokerages and banks disbanded their research departments after the research unbundling rules under MiFID II came in, so it’s unlikely that we’ll see any immediate benefit. Although this might gradually return over time.”
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