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Statement at the SEC Regulation Think-In 2020 Conference

Sept. 16, 2020


Hello, and thank you, Mark [Berman] and Jim [Burns], for inviting me to be part of this conference.  It’s a pleasure to join you and the many representatives from the international community of investment advisers in attendance.

I believe this is the first time that this conference has been held virtually.  Like all of you, we in the Division of Investment Management have been adjusting to the new virtual world.  While adapting to a work from home environment has brought its challenges, the Division has not only remained fully functional but has taken on the additional work that has grown out of the pandemic and market events this spring.  The amount of outreach, monitoring, international and domestic coordination, and emergency response work carried about by Division staff this year would have been ambitious under normal circumstances.  I am proud to say that the staff has risen to the challenge and done remarkable work, including assisting advisers and funds through recommending targeted relief and issuing guidance to help them address their own operational and other challenges over the course of this year.

Today, I’m going to keep my prepared remarks brief because I’m looking forward to sitting down to chat with Jim, but I wanted to touch on two important issues at the start: first, the Division of Investment Management’s focus on international policy, particularly relating to the pandemic; and second, recent developments in Europe relating to MiFID II’s unbundling of research.[1]

Before I begin, however, let me remind you that I am speaking today only for myself and not for the Commission, the Commissioners, or the staff.[2]

International Policy

International policy has always been an important area of focus for the Division, and the significance of this work has grown in recent years.  As is no surprise to anyone at this conference, today, the financial markets – including the market for asset management – operate on a global basis.  Market practices and the impact of regulatory decisions around the world can have effects beyond the borders of their home jurisdictions.  These connections can contribute to a vibrant sharing of ideas but can also challenge us in seeking ways to reconcile different approaches.

Our work on international policy focuses on two main areas: first, engaging with international organizations and regulators.  And second, monitoring the effects of foreign policy on our regulated entities.

As a global community, we can learn a great deal from each other’s perspectives and experiences through conversation and collaboration.  For this reason, we engage with our international counterparts both bilaterally and through our representation on the Financial Stability Board and IOSCO.  This dialogue is particularly valuable as an opportunity to learn about our jurisdictional and regulatory differences and similarities.  For example, while certain European funds use swing pricing as a liquidity risk management tool, this practice has not been operationalized in the U.S.  I believe that information about the European experience can help us understand if it is possible to make this an effective tool in the U.S.  The importance of international engagement has been even more evident in recent months.  The global pandemic has affected all of our markets, economies, and day to day lives.  Through our strong relationships with non-U.S. regulators and our robust participation on the FSB and IOSCO, we have benefited from sharing experiences of how our markets have been affected by the pandemic and how our respective regulatory frameworks have weathered these trying times.  We have sought to contribute our experience with, among other things, extensive outreach, data analysis and regulatory assistance.  While COVID-19 is first and foremost a global health crisis, it has had potentially significant implications for financial markets, investors, and financial stability.  In many ways, the pandemic, which continues to affect our lives and the economy, is among the first true tests of the post-2008 reforms.

Even prior to the current market dislocations, the interest of international organizations and central banks concerning the role of asset management in the economy had grown.  The focus of this interest has included the impact of non-bank finance on market resiliency and the interconnections among banks, asset managers and other non-banks.  As a result, there has been global interest in how asset management, and the sectors of the economy in which its role has grown, have weathered the market turmoil, and our strong international engagement has been valuable to assisting others in understanding these events.

This dialogue has helped to frame some important questions about policy going forward, particularly with respect to money market funds, liquidity and operational risk.  As we all work to understand these events and their implications for policy, I would encourage asset managers and other stakeholders to engage with us, with their home jurisdiction regulators (if it’s not us) and with the FSB and IOSCO when they seek public input.  Our dialogue will benefit from a wide range of perspectives, including the insights and experience you can offer. 


I would now like to focus on a topic that illustrates how closely international markets and policy have become connected – payments for research and the requirements of MiFID II.  As you know, MiFID II, by changing how asset managers could pay for research in the E.U., raised questions concerning compliance among U.S. broker-dealers and asset managers.[3]  Over the last several years, these firms have been navigating the changing landscape of business practice and regulatory requirements.  In order to assist firms with these challenges, Division staff issued no-action letters in October 2017 addressing the impact on the broker-dealer exclusion when an asset manager pays for research using hard dollars.  This position, while time-limited, was extended until July 2023 in light of the fact that business practices after the implementation of MiFID II were continuing to evolve.

Indeed, just last month, in connection with Europe’s response to COVID-19, the European Commission published a consultation that would amend the rules regarding research on small and mid-cap European companies and on European fixed income instruments.  The changes, if enacted, would permit investment firms to make joint payments for research and execution, subject to certain conditions.[4]  In a related press release, E.C. officials noted “[t]he exceptional circumstances resulting from the coronavirus pandemic have instilled a sense of urgency into the debate on investment analysts’ research.  Increasing the visibility of European companies, in particular [small and mid-size enterprises], to investors will promote more investment for the economic recovery.”[5] At the same time, a recent ESMA study “did not find material evidence of harmful effects from the implementation of MiFID II” and found that “SMEs did not appear to be disproportionately affected in terms of research intensity, research coverage, and research quality.”[6]

In light of these recent developments, and in particular that views on the impact of regulatory changes on research coverage and quality continue to be a matter of debate, I would like to encourage affected firms to consider a few key questions.  First, have views on the right outcome for long-term policy in the U.S. changed in the last year?  We have engaged extensively with asset managers and broker-dealers since 2017, but most recently, the focus of most firms has, understandably, been elsewhere.  If views have evolved since our last engagement, please let us know.  In particular, we would like to understand whether the November 4, 2019, staff extension letter,[7] including its discussion of Client Commission Arrangements, the E.C. consultation or other developments in market practice have changed your views.

Second, we would like to hear from firms regarding how settled they view the landscape.  Recent changes support the view the staff expressed last year in extending the no-action position for a limited period that practice and policy continued to be in flux.  Do firms view these recent developments as likely to effect further change in the U.S. markets, and how should that affect timing of next steps for long-term policy in the U.S.?

Finally, I would like to renew our request for data and other information, particularly concerning how MiFID II's research provisions are affecting various market participants, including whether research availability has been adversely affected.  Recent studies have provided valuable perspectives on the market, and the more hard data we have, the better we can assess policy options. 


I appreciate the invitation to speak to you today.  As should be clear from my remarks, we can all benefit from a continued exchange of information and perspectives.  This is particularly evident as we continue to face the impacts of the global pandemic on our markets and daily lives. 

[1] The directive commonly referred to as "MiFID II" is the European Union's Directive 2014/65, of the European Parliament and of the Council of 15 May 2014 on Markets in Financial Instruments and Amending Commission Directive 2002/92 and Council Directive 2011/61, O.J. (L 173) 57, 349.

[2] The Securities and Exchange Commission (“SEC” or “Commission”) disclaims responsibility for any private publication or statement of any SEC employee or Commissioner.  This speech expresses the author’s views and does not necessarily reflect those of the Commission, the Commissioners, or other members of the staff.

[3] In 2017, Commission staff responded to these questions by issuing three no-action letters to assist market participants in complying with the research requirements of MiFID II in a manner consistent with the U.S. federal securities laws. See, e.g., SEC Announces Measures to Facilitate Cross-Border Implementation of the European Union’s MiFID II’s Research Provisions (Oct. 26, 2017), available at: and Speech by Dalia Blass, Keynote Address: ICI Funds and Investment Management Conference (Mar. 18, 2019), available at:  One of these letters provided temporary no-action assurances under the Advisers Act to broker-dealers that receive certain payments under MiFID.  Securities Industry and Financial Markets Association, SEC Staff No-Action Letter (Oct. 26, 2017).

[4] European Commission: Capital Markets – Research on Companies Seeking Alternative Financing (Updated Rules per COVID-19), Consultation (open July 24, 2020 to Sept. 4, 2020), available at:

[5] See, European Commission: Coronavirus Response: Making Capital Markets Work for Europe’s Recovery (July 24, 2020), available at:

[6] The same report also stated that “[r]ecent increases in the number of companies no longer being covered by research analysts (‘research coverage’) appear to be a continuation of a long-term trend. The quality of research has been steadily improving in recent years.” See ESMA Report on Trends, Risks and Vulnerabilities, 2 September 2020, available at 1287_report_on_trends_risks_and_vulnerabilities_no.2_2020.pdf.

[7] See Securities Industry and Financial Markets Association, SEC Staff No-Action Letter (Nov. 4, 2019), available at:

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