In this report, we explore how MiFID II inducements requirements apply to firms and their counterparties in common scenarios.
The MiFID II inducements regime is complex and can cause confusion. Not only do different requirements apply to different scenarios, but the same requirements apply differently to the different parties involved in a single scenario. As a result, parties to a transaction may reach different conclusions when conducting their own assessment of whether a particular fee structure or benefit is permissible. This may be the case in common sell-side/buy-side and manufacturing/distribution interactions.
This report outlines the MiFID II inducements regime and applies the rules to a number of common scenarios involving the payment of fees or the provision of other benefits such as research, corporate access, and hospitality. This will help firms that are subject to MiFID II understand how the inducements-related obligations interact and apply both to themselves and to their counterparties.
The analysis set out in this report is broad and relies on a number of unstated simplifying assumptions. Given the complexity of the MiFID II inducements regime, firms should consult their own legal advisors for advice on applying these requirements to any specific scenario. While this report has been written in the context of UK MiFID, the UK and EU MiFID inducements regimes remain substantially aligned in many respects and so, broadly speaking, our analysis should be applicable under both regimes. However, we do highlight certain areas of particular divergence.