The Impact of MiFID II for IROs: A Panel Discussion

Nasdaq hosted a MiFID II event in association with the IR Society this week. Laura Hayter reviews the discussion panel and offers some advice to IROs ahead of implementation in January 2018.

David Lloyd-Seed, Chair of the IR Society also joined the esteemed panel of speakers at Nasdaq to discuss the impact of MiFID II on the IRO.

The topic of MIFID II continues to run and gather pace as we approach implementation date of Jan 3, 2018. There has been a lot of headlines around the sell-side and the change in the market for research. Will the broker model change? How much are banks going to charge for research? Will smaller companies see a decline in research?

The big debate around how investors will be charged by banks for access and research rumbles on. While there are no published figures, there are a variety of models being tried out by banks– a menu of services – ranging from basic access to electronic research to access to expert advice and real live analyst communications. The more you pay the better the access. It’s getting competitive and it’s not going to stop.

The buy-side have been somewhat latecomers to the MiFID II party, but they have changed their approach more rapidly than anticipated by the market in recent weeks. Most have now confirmed how they plan to pay for research, with many absorbing the cost of analyst research under MiFID II (see FT article for definitive list).

So what does this mean for Investor Relations? Like Y2K we are not going to wake up on January 3 and see anything different; it’s going to be a patchy market though for IR teams to navigate as banks and investors duke it out.

Here are some of the scenarios discussed at this week’s event:

  • Competition in sell side research will rise with smaller companies seeing research coverage decline. The buy side will want to pay for top analyst coverage, and be more selective for the research they buy versus what they undertake themselves
  • Information flow for companies will be more difficult to monitor in the wake of MiFID II as the buy- and sell-side are selective in what research they pay for and distribute respectively
  • The number of sell-side conferences will go down. Investors will be selective if they have to pay, and corporates will want to go where there’s value
  • IR teams will be challenged with resources as they have to take more control of institutional targeting, directly-organised shareholder meetings, and managing analyst consensus among other things

What can you do as an IRO to prepare for MiFID II? The impact on companies will be different depending on size and sector, with many facing additional resource and budget requirements, but this is also an opportunity for IROs to take control of their IR programmes and remember the 5 C's of IR:

  • Commitment of company management to empower and fully resource IR given any gaps in the post-MiFID II market
  • Consistency of message in good and bad times
  • Clarity of investment story and investor communications. Take control of your shareholder targeting
  • Credibility of management and the IR team given the need to step up/wave the flag 
  • Conduit, like all fruitful relationships, IR is a dialogue that informs a company’s strategic thinking

Laura Hayter
Head of Policy & Communications, The IR Society

Published 19 October, 2017

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