On April 7, the European Commission adopted its first delegated directive (Delegated Directive) to supplement the amended and restated Markets in Financial Instruments Directive (MiFID II). The Delegated Directive sets out provisions in relation to the safeguarding of financial instruments and funds belonging to clients, product governance obligations, and the provision and reception of fees, commission, and monetary or non-monetary benefits (or inducements).

Notably, the Delegated Directive confirms that research provided to investment firms by third parties will not be considered an inducement if it is paid directly by the investment firm out of its own resources or from a separate research payment account (RPA), the operation of which is subject to certain conditions, including that investment firms agree to the research charge with clients, set a research budget that is regularly assessed and make a payment summary of the RPA available to clients or competent authorities on request. The Delegated Directive also confirms that investment firms providing execution services must identify separate charges for those services that reflect the cost of executing transactions only.

The European Council and European Parliament will consider the Delegated Directive and, once formally approved, the Delegated Directive will go into effect 20 days following its publication in the Official Journal of the European Union.

A copy of the Delegated Directive can be found here.