1 00:00:00,080 --> 00:00:04,520 Speaker 1: Europe's Markets and Financial Instruments Directive or MIFFED two, takes 2 00:00:04,559 --> 00:00:08,440 Speaker 1: effect in January, and it is causing disruption and confusion 3 00:00:08,440 --> 00:00:11,320 Speaker 1: in the investment research world. If it too will change 4 00:00:11,320 --> 00:00:13,960 Speaker 1: the way that investment research can be paid for, preventing 5 00:00:14,000 --> 00:00:17,640 Speaker 1: broker dealers from bundling free research with other services they offer. 6 00:00:18,120 --> 00:00:20,520 Speaker 1: And many banks are concerned that their approach to complying 7 00:00:20,520 --> 00:00:23,480 Speaker 1: with the new MIFFED rules or raise new regulatory issues 8 00:00:23,520 --> 00:00:26,520 Speaker 1: for them. In the United States, the Securities and Exchange 9 00:00:26,560 --> 00:00:29,840 Speaker 1: Commission is reportedly considering ways to provide relief to Wall Street. 10 00:00:30,080 --> 00:00:33,720 Speaker 1: But time is running short for banks to prepare here 11 00:00:33,720 --> 00:00:36,000 Speaker 1: to talk with us about the changes mif it is 12 00:00:36,000 --> 00:00:37,880 Speaker 1: going to put in place, and what what is going 13 00:00:37,920 --> 00:00:41,200 Speaker 1: on in the investment research world. Is Bloomberg News editor 14 00:00:41,280 --> 00:00:44,440 Speaker 1: Jesse Westbrook, who's joining us from the Bloomberg ninety nine 15 00:00:44,479 --> 00:00:48,479 Speaker 1: one studio in Washington, d C. Jesse, You've been following 16 00:00:48,479 --> 00:00:51,800 Speaker 1: this very closely. How big a change is this really 17 00:00:52,520 --> 00:00:56,400 Speaker 1: in regard to investment research? I mean for banks, it's 18 00:00:56,400 --> 00:00:58,840 Speaker 1: a huge game changer. I mean, we all know banks 19 00:00:58,840 --> 00:01:03,240 Speaker 1: put out endless research notes on the economy, on individual stocks, 20 00:01:03,240 --> 00:01:06,920 Speaker 1: on bonds, um I mean, it's pretty central to what 21 00:01:07,000 --> 00:01:10,760 Speaker 1: they do in a lot of ways, and their clients, 22 00:01:10,760 --> 00:01:15,160 Speaker 1: who are big money managers um basically get a lot 23 00:01:15,200 --> 00:01:17,280 Speaker 1: of this research or all of this research for free 24 00:01:17,319 --> 00:01:20,600 Speaker 1: at a minimum. It's sort of rolled into other services 25 00:01:20,600 --> 00:01:23,160 Speaker 1: they pay for, like execution of trades. And that's just 26 00:01:23,240 --> 00:01:26,440 Speaker 1: always the way it's been done. You you pay Goldman, 27 00:01:26,520 --> 00:01:29,800 Speaker 1: Sacks or Ubs a ton of money to execute your trades, 28 00:01:30,319 --> 00:01:32,680 Speaker 1: and they add a lot of perks on top of that, 29 00:01:32,959 --> 00:01:36,320 Speaker 1: and one of those perks has been research. The Europeans 30 00:01:36,480 --> 00:01:39,839 Speaker 1: think that that's conflicted. They think it's opaque what people 31 00:01:39,880 --> 00:01:43,840 Speaker 1: are paying for these this research. They think the clients themselves, 32 00:01:43,840 --> 00:01:45,959 Speaker 1: who if you manage if you know you or me, 33 00:01:46,600 --> 00:01:49,440 Speaker 1: if we have a big money manager who's managing our money, 34 00:01:49,520 --> 00:01:51,920 Speaker 1: you know, how much am I paying for that research? 35 00:01:52,000 --> 00:01:53,920 Speaker 1: Is it coming out of the fees I pay my 36 00:01:53,960 --> 00:01:57,960 Speaker 1: money manager uh to to manage my money? Is it 37 00:01:58,040 --> 00:02:00,520 Speaker 1: a fair Is it a fair fee? How much am 38 00:02:00,520 --> 00:02:03,200 Speaker 1: I benefiting from that? Europe wants to make this all 39 00:02:03,240 --> 00:02:06,520 Speaker 1: a lot more transparent. The problem is it causes a 40 00:02:06,520 --> 00:02:09,720 Speaker 1: lot of ripple effects with with how banks are regulated, 41 00:02:09,840 --> 00:02:13,639 Speaker 1: both in the US and globally, so Jesse, even though 42 00:02:13,760 --> 00:02:16,800 Speaker 1: these rules are are just supposed to apply to Europe, 43 00:02:17,360 --> 00:02:19,919 Speaker 1: doesn't mean that that whole business model that you've been 44 00:02:19,960 --> 00:02:24,800 Speaker 1: describing is going to have to change everywhere or absolutely absolutely, 45 00:02:24,919 --> 00:02:27,240 Speaker 1: And and you know, banks expect to have to lay 46 00:02:27,240 --> 00:02:29,560 Speaker 1: a lot of people off to comply with this rule 47 00:02:29,639 --> 00:02:32,160 Speaker 1: because they're all cutting their research budgets as a result 48 00:02:32,200 --> 00:02:35,240 Speaker 1: of it. But to your question about the the the US, 49 00:02:35,720 --> 00:02:38,360 Speaker 1: So in the US, the way the SEC regulates things 50 00:02:38,520 --> 00:02:44,240 Speaker 1: is if you are selling research um to someone, that 51 00:02:44,400 --> 00:02:47,440 Speaker 1: is a form of providing investment advice. So then that 52 00:02:47,800 --> 00:02:50,080 Speaker 1: is a trip wire that sets off all other kind 53 00:02:50,120 --> 00:02:52,800 Speaker 1: of regulatory burdens if because in the US, if if 54 00:02:52,840 --> 00:02:55,480 Speaker 1: we deem you to be offering investment advice, then you're 55 00:02:55,480 --> 00:02:58,839 Speaker 1: regulated as a money manager. And that would be a 56 00:02:58,880 --> 00:03:03,400 Speaker 1: disaster for or brokers at Goldman Sachs u B S, 57 00:03:03,480 --> 00:03:06,880 Speaker 1: JP Morgan because the regulation that we have in the 58 00:03:06,960 --> 00:03:09,680 Speaker 1: US for money managers is much more aggressive than the 59 00:03:09,680 --> 00:03:14,320 Speaker 1: way we regulate broker dealers. So, Jesse, what is going 60 00:03:14,360 --> 00:03:16,680 Speaker 1: on right now between the banks and the SEC about 61 00:03:16,720 --> 00:03:19,720 Speaker 1: how to approach these issues. Yeah, they've basically been in 62 00:03:19,760 --> 00:03:23,200 Speaker 1: there since they saw that Medfild was coming down the pipeline, 63 00:03:23,560 --> 00:03:26,240 Speaker 1: and they've been begging the SEC to fix this and 64 00:03:26,760 --> 00:03:29,880 Speaker 1: the ex SEC. You know, it's not so much that 65 00:03:29,919 --> 00:03:32,160 Speaker 1: they've dragged their feet on this. We've had a turnover 66 00:03:32,200 --> 00:03:36,520 Speaker 1: in administration. Trump surprised any everybody when he won in November. 67 00:03:37,000 --> 00:03:41,000 Speaker 1: He obviously has a more skeptical view of a lot 68 00:03:41,000 --> 00:03:44,400 Speaker 1: of these agencies than Obama had. So you can argue 69 00:03:44,880 --> 00:03:46,840 Speaker 1: what the consequence of that, but it seems like one 70 00:03:46,880 --> 00:03:49,960 Speaker 1: consequence is they've been a little slow to staff these agencies. 71 00:03:50,360 --> 00:03:55,520 Speaker 1: They questioned their purpose broadly, and uh so the SEC 72 00:03:55,720 --> 00:03:58,320 Speaker 1: has kind of been a bit of a state of turmoil. 73 00:03:58,440 --> 00:04:00,720 Speaker 1: So you know, Wall Streets in there every day saying 74 00:04:00,720 --> 00:04:02,480 Speaker 1: you gotta fix this for us, You gotta fix this 75 00:04:02,520 --> 00:04:05,680 Speaker 1: for us, and the SEC and its new chairman are 76 00:04:05,720 --> 00:04:08,560 Speaker 1: just sort of getting the lay of the land. Um 77 00:04:08,640 --> 00:04:11,760 Speaker 1: so so Jay Clayton, the Wall Street deals lawyer who 78 00:04:11,840 --> 00:04:15,720 Speaker 1: who is Trump's Trump's chairman of the SEC. He's only 79 00:04:15,760 --> 00:04:18,680 Speaker 1: been in there since May, and since May when he 80 00:04:18,720 --> 00:04:21,880 Speaker 1: got in there. It seems like Wall Street's message on 81 00:04:21,920 --> 00:04:25,919 Speaker 1: this MIFFT issue is resonating, and from what we understand, 82 00:04:25,920 --> 00:04:28,600 Speaker 1: the SEC has been much at more active since Clayton 83 00:04:28,640 --> 00:04:30,760 Speaker 1: got in there of trying to come up with solution. 84 00:04:30,800 --> 00:04:32,880 Speaker 1: It could be that before he got in there, they 85 00:04:32,920 --> 00:04:35,360 Speaker 1: just didn't really have anyone running the show. Jessie, only 86 00:04:35,400 --> 00:04:37,279 Speaker 1: about a minute left. What what are those sorts of 87 00:04:37,320 --> 00:04:40,120 Speaker 1: things the SEC might do to provide some relief? Yeah, 88 00:04:40,160 --> 00:04:42,600 Speaker 1: I mean the easiest way, in the easiest way when 89 00:04:42,640 --> 00:04:45,200 Speaker 1: you face a tight deadline is to basically just tell 90 00:04:45,320 --> 00:04:49,200 Speaker 1: financial firms, look, comply with the European rules. We know 91 00:04:49,279 --> 00:04:51,680 Speaker 1: it violates our rules, but we're not going to punish 92 00:04:51,720 --> 00:04:55,720 Speaker 1: you for it. Well, our thanks to Jesse Westbrook, Dave 93 00:04:55,760 --> 00:04:58,760 Speaker 1: Bloomberg News editor, who has been following uh the disruption 94 00:04:58,839 --> 00:05:02,359 Speaker 1: and possible solutions on Miffed two as banks grappled with 95 00:05:02,360 --> 00:05:05,159 Speaker 1: new rules on investment research. Jesse, thanks very much for 96 00:05:05,240 --> 00:05:08,479 Speaker 1: being here today. Coming up on Bloomberg Law, a federal 97 00:05:08,600 --> 00:05:11,800 Speaker 1: judge struck down Texas Voter I D case for the 98 00:05:11,839 --> 00:05:15,080 Speaker 1: second time after the Justice Department had switched sides. Previously, 99 00:05:15,120 --> 00:05:18,240 Speaker 1: the Justice Department had been against the law, saying it 100 00:05:18,279 --> 00:05:21,360 Speaker 1: was discriminatory, but under Attorney General Jeff Sessions, the Justice 101 00:05:21,360 --> 00:05:24,600 Speaker 1: Department went the other way. Nevertheless, when the case came 102 00:05:24,600 --> 00:05:27,479 Speaker 1: back to this federal judge in Texas he struck the case. 103 00:05:27,560 --> 00:05:30,520 Speaker 1: He struck the voter I D law down. Uh that 104 00:05:30,520 --> 00:05:33,120 Speaker 1: we're gonna be talking about the consequences with that. The 105 00:05:33,200 --> 00:05:36,480 Speaker 1: professor at Stanford University Law School, who is an expert 106 00:05:36,560 --> 00:05:40,960 Speaker 1: on voter identification laws. That's coming up straight ahead on 107 00:05:41,120 --> 00:05:44,839 Speaker 1: Bloomberg Law. More on the Texas voter ID law, a 108 00:05:44,839 --> 00:05:47,719 Speaker 1: case we've been following for some time and something that 109 00:05:47,800 --> 00:05:51,000 Speaker 1: could have huge impacts on the enforcement of voter ID 110 00:05:51,160 --> 00:05:53,360 Speaker 1: issues in the United States going forward.