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The European Commission has recently adopted its Delegated Directive under MiFID II with regard to the rules applicable to how investment research is paid for.

The original drafting of the rules would have required fund managers to pay to receive all investment research. We believe that this would have severely restricted the distribution of smaller company research to institutional investors.

The new Delegated Directive clarifies that certain types of investment research such as written material that is paid for by a corporate issuer (or potential issuer) to promote a new issuance, or research paid for by the issuer on its company on an ongoing basis, should continue to be allowed and, importantly for smaller companies, should be openly available.

This means that quoted companies can continue to pay their brokers or other research providers to continue to issue research on their company and this can be distributed widely to institutional investors and others.

The limited availability of investment research for small and mid-size quoted companies has been one of our most important campaigns since our response to ESMA in 2014 in the context of MiFID II rules. We have since been pointing out to the Commission the importance of adequately drafting investment research rules so that smaller companies can have the effective research coverage that they need in order to increase their visibility and trading in their shares, thus promoting liquidity and growth.

We welcome that the Commission has considered our concerns and made clear that small and mid-size quoted companies can continue to have investment research produced on them and freely distributed to investment managers and others.

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