BofA inches closer to US research fees as MiFID conflicts loom

Bloomberg

Bank of America Corp. made the legal leap required to untangle what US clients are charged
for research and trading, bringing to America a version of
the changes being forced on markets in Europe.
Its Merrill Lynch unit added the firm’s research department to an existing investment adviser registration late on Thursday, according to a document on the US Securities and Exchange Commission’s website.
The research unit could bill quarterly fees “for the provision and delivery of research services” that are “separately negotiated with each client,” it said in the filing.
It’s the first move among top-tier investment banks wrestling with new European rules to stipulate a plan to give US clients the option to pay for research in what’s known as “hard dollars” — fees unbundled from trading commissions.
Bank executives have been grappling with how to adapt business practices amid a rewrite of the European Union’s Markets in Financial Instruments Directive. Since the rules ban the fee bundling practice in the bloc starting in January, US firms producing research for European clients have expressed concern that complying will put them in legal peril with American authorities.
“We believe the decision to operate as an investment adviser provides the greatest
flexibility for our franchise and best serves the long-term needs of our global investor client base,” the bank said in a statement emailed by spokeswoman Selena Morris.
The registration allows the bank’s clients to “continue to receive our outstanding research as it exists now and pay for our US content and services in any manner they elect.”
By filing the registration, Bank of America is shrugging off the SEC’s attempt to temporarily resolve the conflicts MiFID II creates with US regulations. The agency said last week it won’t take action for the first 30 months against firms subject to the new rules.
Bank of America decided to forge ahead with plans it made in July and August to register its research department as an investment adviser because the SEC’s relief was likely to be temporary, according to two people with knowledge of the matter. Bank executives were also concerned that other regulators could enforce their rules around fees
because the SEC’s no-action letters don’t preclude states from activity, one of the people said.