The United States and the European Union have fundamentally different laws governing how broker-dealers must charge investors for investment research. Brokers in the European Union must provide unbundled research to comply with the Markets in Financial Instruments Directive II (MiFID II), and brokers in the United States must provide bundled research to avoid registration as a Registered Investment Adviser (RIA). These laws have been in conflict for many years, but a No-Action letter from the SEC has stayed any major conflict with MiFID II’s unbundled approach. Previous research has shown that MiFID II’s unbundled research payments are better for investors because they are more transparent, are more market efficient, and more effectively prevent fraud. With the expiration of the SEC’s No-Action letter in July 2023, this Comment utilizes this past evidence to argue that the SEC must adopt unbundled research payments to comply with the SEC’s statutorily mandated mission to protect investors, maintain efficient markets, and facilitate capital formation.
