Chairman Jay Clayton
U.S. Securities and Exchange Commission
100 F Street NE
Washington, DC 20549

Re: Comments on Impact of MiFID II Research Provisions

Dear Chairman Clayton:

The Securities Industry and Financial Markets Association (“SIFMA”)1 urges the Securities and Exchange Commission (“SEC”) to provide permanent relief by rule or exemption allowing broker-dealers to charge separately or receive cash payments for research provided to investment managers and other institutional investors without the broker-dealers being deemed investment advisers subject to the Investment Advisers Act of 1940 (“Advisers Act”). While the SEC staff’s October 2017 no-action relief was critical to minimize disruption triggered by the European Union’s MiFID II directive, which effectively requires investment managers impacted by MiFID II to unbundle—that is, to pay for research separately from client trading commissions2—permanent and broader action is now needed given broader changes that are occurring in the global research marketplace.

SIFMA members are increasingly seeing a desire for greater flexibility and transparency in how to pay for research among investment managers and other institutional investors that are not subject to MiFID II directly or by contractual obligation.3 Unfortunately, broker-dealers are placed in a difficult position when receiving these requests. In these situations, broker-dealers have two options: (1) forego separate payments and decline to provide research and other content to investment managers that insist on paying separately from trading commissions, or (2) accept separate payments for research that may make them investment advisers, and attempt to deal with the challenges and ambiguities presented by investment adviser status. Either option could diminish the extent and value of research provided to investment managers.

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