1.Member States shall ensure that the provision of research by third parties to investment firms providing portfolio management or other investment or ancillary services to clients shall not be regarded as an inducement if it is received in return for either of the following:
(iv)the investment firm regularly assesses the quality of the research purchased based on robust quality criteria and its ability to contribute to better investment decisions.
2.Where an investment firm operates a research payment account, Member States shall ensure that the investment firm shall also be required, upon request by their clients or by competent authorities, to provide a summary of the providers paid from this account, the total amount they were paid over a defined period, the benefits and services received by the investment firm, and how the total amount spent from the account compares to the budget set by the firm for that period, noting any rebate or carry-over if residual funds remain in the account. For the purposes of point (b)(i) of paragraph 1, the specific research charge shall:
3.Every operational arrangement for the collection of the client research charge, where it is not collected separately but alongside a transaction commission, shall indicate a separately identifiable research charge and shall fully comply with the conditions set out in point (b) of the first subparagraph of paragraph 1 and in the second subparagraph of paragraph 1.
4.The total amount of research charges received may not exceed the research budget.
5.The investment firm shall agree with clients, in the firm's investment management agreement or general terms of business, the research charge as budgeted by the firm and the frequency with which the specific research charge will be deducted from the resources of the client over the year. Increases in the research budget shall only take place after the provision of clear information to clients about such intended increases. If there is a surplus in the research payment account at the end of a period, the firm should have a process to rebate those funds to the client or to offset it against the research budget and charge calculated for the following period.
8.For the purposes of point (b) (iv) of paragraph 1, investment firms shall establish all necessary elements in a written policy and provide it to their clients. It shall also address the extent to which research purchased through the research payment account may benefit clients' portfolios, including, where relevant, by taking into account investment strategies applicable to various types of portfolios, and the approach the firm will take to allocate such costs fairly to the various clients' portfolios.
1.(b) paymentsMember fromStates shall ensure that investment firms that operate a separate research payment account controlledas byreferred theto investmentin firm,Article provided24(9a), point (d)(ii), of Directive 2014/65/EU, meet the following conditions relating to the operation of the account are met:account:
(a)(i) the research payment account is funded by a specific research charge to the client;
(b)(ii) as part of establishing a research payment account and agreeing the research charge with their clients, investment firms set and regularly assess a research budget as an internal administrative measure;
(c)(iii) the investment firm is held responsible for the research payment account;account.
1a. WithMember regardStates toshall pointensure (b) of the first subparagraph, where anthat investment firmfirms makesthat make use of thea research payment account,account itas shallreferred to in paragraph 1 provide the following information to their clients:
(a)before the provision of anproviding investment serviceservices to their clients, information about the budgeted amount for research and the amount of the estimated research charge for each of them;client;
(b)annual information on the total costs that eachthe ofinvestment themfirm has incurred for third party research.
2.Member States shall ensure that investment firms that choose to pay separately for execution services and research and that operate a research payment account as referred to in paragraph 1, shall provide, upon request of their clients or of competent authorities all of the following:
(a)a list of the providers paid from that research payment account;
(b)the total amount those providers were paid over a specified period;
(c)(a) directthe paymentsbenefits and services received by the investment firm outfrom ofthose its own resources;providers;
(d)how the total amount spent from the research payment account compares to the budget set by the investment firm for that period, noting any rebate or carry-over if residual funds remain in the account.
For the purposes of paragraph 1, point (a), Member States shall ensure that the estimated research charge is:
(a)only be based on a research budget set by the investment firm for the purposethird-party ofresearch establishingnecessary for the need for third party research in respectprovision of investment services rendered to itsthe clients;clients andof that investment firm;
(b)not be linked to the volume and/oror value of transactions executed on behalf of the clients.
3.Member States shall ensure that investment firms that choose to pay separately for execution and research services and that operate a research payment account as referred to in paragraph 1:
(a)indicate, for every operational arrangement for the collection of the client research charge, a separately identifiable research charge;
(b)fully comply with the conditions set out in paragraphs 1 and 1a.
4.Member States shall ensure that investment firms that choose to pay separately for execution services and research and that operate a research payment account as referred to in paragraph 1 do not receive a total amount of research charges that exceeds their research budget.
5.Member States shall ensure that investment firms that choose to pay separately for execution services and research and operate a separate research payment account as referred to in paragraph 1 agree with their clients, in their management agreement or general terms of business, the research charge as budgeted by the investment firm and the frequency with which the specific research charge will be deducted from the resources of the client over the year.
Member States shall ensure that investment firms only increase their research budget after they have provided their clients with clear information about such intended increases.
Member States shall ensure that investment firms have a process to refund any surplus in the research payment account at the end of a period to their clients or to offset it against the research budget and charge calculated for the following period.
6.Member States shall ensure that investment firms that choose to pay separately for execution and research services and that operate a research payment account as referred to in paragraph 1, are solely responsible for the management of the research budget referred to in paragraph 1, point (b).
Member States shall ensure that the research budget referred to in paragraph 1, point (b) is based on a reasonable assessment of the need for third party research.
6. ForMember the purposes of point (b)(ii) of the first subparagraph of paragraph 1, the research budgetStates shall beensure managed solely bythat the investment firm and shall be based on a reasonable assessment of the need for third party research. The allocation of the research budget to purchase third party research shall beis subject to appropriatethe investment firm’s controls and senior management oversight that are deemed objectively appropriate to ensure itthat the research budget is managed and used in the best interests of the firm'sinvestment firm’s clients. ThoseMember States shall ensure that those controls include a clear audit trail of payments made to research providers and of how the amounts paid were determined with reference to the quality criteria referred to in paragraph 110, (b)first (iv).subparagraph. InvestmentMember States shall ensure that investment firms shalldo not use the research budget and research payment account to fund internal research.
7.For the purposes of point (b)(iii) of paragraph 1, thepoint (c), Member States shall ensure that investment firmfirms may delegate the administration of the research payment ac-countaccount to a third party, provided that thesuch arrangement facilitates the purchase of third partythird-party research and paymentsthe payment to research providers in the name of the investment firm without any undue delay in accordance with the investmentinvestment’ firm'sfirm’s instruction.
9.An investment firm providing execution services shall identify separate charges for these services that only reflect the cost of executing the transaction. The provision of each other benefit or service by the same investment firm to investment firms, established in the Union shall be subject to a separately identifiable charge; the supply of and charges for those benefits or services shall not be influenced or conditioned by levels of payment for execution services.
10.Member States shall ensure that, irrespective of how investment firms pay for execution and research services, they base their annual assessment of the research, required under Article 24(9a), point (c), of Directive 2014/65/EU, on robust quality criteria enabling firms to objectively assess the quality, usability, value of the research and ability of the research to contribute to better investment decisions.
Member States shall ensure that investment firms take the necessary remedial actions where assessments reveal a lack of quality, usability, value of the research or lack of contribution of the research to a better investment decision.