Views on improving the integrity of global capital markets
18 March 2015

Unbundled Commissions: Explicit Payment for Investment Research Set to Alter Industry (Video)

The issue of how equity commissions are used to buy investment research is taking center stage in the European Union, where regulators have proposed requiring asset managers to “unbundle” payment for trade execution from payment for research, and to establish research budgets to be agreed upon in advance with asset owners.

Rhodri Preece, CFA, head of capital markets policy for the Europe, Middle East and Africa (EMEA) region at CFA Institute, and Neil Scarth, principal at Frost Consulting and author of a report co-sponsored by CFA Institute and CFA Society United Kingdom on investment research valuation approaches, discuss the origins of the commission-based research model, potential implications of reform on asset managers in Europe as well as globally, and the likely impact on the sell-side research business. Says Scarth, “What it means is that it will force all research providers … to migrate to areas where they really have top-rated analysts or significant comparative advantages. There will be limited appetite and a finite budget for mediocre research because it doesn’t add any value.”

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About the Author(s)
Crystal Detamore

Crystal Detamore is a communications director at CFA Institute and a former columnist for Entrepreneur magazine.

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