A review of the UK’s rules for investment research was announced as part of last year’s Edinburgh Reforms. Now the first stakeholder engagement under the review has begun. A call for evidence is open for three weeks until 24 April 2023.
The investment research review is running to an accelerated timetable. Launched last month, it is due to report its recommendations to the UK government in June 2023. The aims of the review are to:
- assess the link between levels of research and the attractiveness of the UK as a destination to list; and
- evaluate options to improve the UK market for investment research.
These aims are reflected in the questions in the call for evidence. Most notably, feedback is wanted on the impact of MiFID II unbundling rules on the UK market. These rules are often pointed to as a source of decline in the provision and quality of research. The review is also interested in hearing about wider impediments to the provision of research to investors, including where rules prevent dialogues between research analysts and issuers (which suggests that discussion about issuer sponsored research could be on the cards in the UK, as it is currently in the EU).
One question zooms in on the changes made to the UK regime for smaller quoted companies, asking whether they have helped investment research in relation to those companies and (mirroring similar discussions in the EU) whether the market capitalisation threshold for SME research is set at the right level. The UK review goes beyond the current EU discussions, opening the door to other potential solutions to incentivise investment research where needed e.g. by seeking to explore whether an SME market capitalisation threshold is the right “cut off” point for incentivising SME research or whether other tests may be more appropriate.
Other questions seek to benchmark the UK regime against similar rules in other financial centres. For example, input is sought on the importance of investment research to the attractiveness of the UK public markets. Another open question invites views on the steps that could be taken to improve the provision and quality of research on UK listed and quoted companies.
There are only 12 working days for stakeholders to contribute to the call for evidence but the review webpage promises that a series of discussions will allow interested parties to explore these issues further. Although the turnaround time for this initial call for evidence is condensed, the review presents an opportunity for market participants to raise a wide range of current impediments and potential solutions.