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the buy-side, he warns.
“The inherent conflict of interest that exists when
owners pay for their own scorecards isn’t palatable
to most investors and is in fact encouraging a corrupt
framework that existed with credit rating agencies
before 2008,” Pacitti says.
The report from the AMF in January said the fact
that the pooling of revenues generated by execution
and research is no longer authorised has led to a
deterioration in coverage of small and medium-
sized companies. This is detrimental to a healthy
competitive environment, the AMF states. It also
proposed using the expression: “research paid for by
the company” on the research note.
The European Commission is preparing to revise
42 // TheTRADE // Spring 2020
some MiFID II rules this year,
with a consultation published
recently, outlining the possible
changes. The AMF argues that
that the European framework
could be modified to introduce a
form of adequation between the
cost and price of research.
It calls for the creation of a
virtual “research marketplace”,
in which investment service
providers and research firms
would exchange financial research
with investors, who would
volunteer to share its cost.