Mifid II: A fresh look as implementation deadline fast-approaches
The countdown to Mifid II is now well and truly on, with less than 100 days until the long-awaited regulation, first announced to the investment community in early 2014, comes into force on January 3, 2018.
Seeking to provide a Europe-wide legislative framework for regulating the operation of financial markets in the EU, the two main areas to see change under Mifid II are corporate access and transparent pricing for research, with the directive placing a strong emphasis on investor protection.
Leah McCreanor is a senior manager for IR at Royal Bank of Scotland. In her view, Mifid II could enhance relationships, but it’s a move that won’t necessarily be straightforward, especially for smaller companies.
‘Mifid II may encourage a greater level of direct interaction and communication between corporates and their investors, which can only be a good thing,’ she comments. ‘But this will bring its own challenges to corporate IR teams in terms of the resources required to plan and execute roadshows in-house. Large corporates may already be well set up for this but smaller companies may find it challenging if there is a greater demand for direct engagement when there is a price tag attached to broker-organized roadshows.’
Speaking about her team at RBS, McCreanor adds: ‘There will be limited impact on our corporate access program at RBS as we arrange all of our UK roadshows internally and we have always made time for meetings with both large and small investors when approached directly. The impact on US and European roadshows going forward is less clear, however. There have been many comments about a reduction in sell-side coverage and the impact on the quality of research, but we will wait to see how this evolves. I think we will see asset managers building up their own in-house research teams over time.’
For companies that outsource some elements of their IR activity, such as results roadshows, the potential impact on corporate access and research is likely to be considerable in the coming years. Many corporates, such as Inmarsat, are already preparing for the effects of the regulation and exploring the alternatives and outcomes that are on the horizon. Rob Gurner, head of IR at Inmarsat, explains the steps he and his team are already taking.
‘We have been preparing for the incoming Mifid II rules since last year,’ he says. “We are planning to take a more active role in things like roadshow logistics and gathering feedback from investors, based on the expectation that corporate brokers may possibly start charging for those activities and that there may be fewer research analysts covering the stock over time. In line with best practice, over the last 18 months we have been collecting analysts’ estimates to prepare our own consensus outlook, which we have been circulating to the investor community on a regular basis.’
What else can IR teams do to ensure they are ticking all the boxes before Mifid II’s final implementation dates? ‘Be prepared,’ advises McCreanor. ‘We are looking in detail at how the regulations will affect us both directly and indirectly. Can we still share consensus forecasts? What do we need to have in place to receive broker notes on RBS and share these internally?
‘I don’t expect to see any immediate change in the way we manage corporate access but we may see an increase in direct approaches from investors. Regulation is on the rise and we are all very conscious that we need to be on top of the details.’
This article was produced by ELITE Connect and originally published on the ELITE Connect platform