mifid 2


The transposition in Italy and Europe of Community legislation on Market Abuse has also led to the reform of the research discipline, in particular of the investment policy, already perceived as an ancillary service, now better defined Also like  “incentive “.

Primary effect is the limit placed on the search purchased  “buy-side ” and an increase in the search purchased sell-side that will have to be more competitive.

This undoubtedly poses new burdens in particular to small and medium-sized enterprises, which do not enjoy the research of large brokers, but at the same time offers good opportunities to the investors and companies that cooperate with them, in particular consultants of IR Communication and Advisor;  While it raises the need for greater knowledge (of the sector, of the market, of both current and potential equity bases, of investment flows, priorities, opportunities and risks of investment and investors of reference) It also offers great opportunities and spaces in communication, financial and institutional economic.

In the following we publish an article freely taken from some articles of NASDAQ and others.

With MIFID II  around the corner on January 3rd, 2018 EU asset managers and European Companies must be sure that they are prepared to meet the new scenario.

For IROs, the impact of new legislation remains both a big unknown and a serious concern.

MIFID II   upends the sell-side research model by requiring fund managers to dismantle the practice of paying for sell-side research with commission dollars. It has been estimated that what is now a $15 bn research industry in Europe could shrink to $10 bn after MIFID II  takes full effect in January 2018.

A radical shake-up in sell-side research is most ominous for smaller companies, which typically struggle for analyst attention. While a paid-for-research market may emerge, the heavy reliance companies have on the brokerage community to connect them with interested parties on the buy side will almost certainly diminish.

As a result, IROs will have to manage more inbound interest and go out and push their investment cases directly to the buy side. Evidence suggests buy-side firms are open to these types of interactions, but it means expanding the roles and responsibilities of IROs quite considerably.

Although MIFID II  is a European Union directive, the effects will almost definitely be felt globally. As the dynamics of soft dollars are redefined, investors will demand the same transparency in the US as well as in other global markets.

Importantly, the shake-up of the research model being ushered in by MIFID II  is turbo-charging a trend that’s been in place since the 1990s: the decline in sell-side research. Today, fewer analysts are covering a far wider range of stocks.

Even companies with ample research coverage are finding that analysts lack in-depth understanding of their companies and are relying on their own assumptions about discount and growth rates. A proactive IRO can ferret out incorrect as­sumptions and can help shape the view of overworked analysts. IROs are also gearing up to respond to higher levels of inbound interest from the buy side. Although all this means more work for IROs, it also presents a tremendous opportunity.

Asset Managers landscape

Asset Managers (AM)  will be required to pay for “substantive” research and advisory services they receive from sell-side under MIFID II. They will pay for investment research from their own P&L or from a separate Research Payment Account (RPA), which must be made public, while non-substantive research can continue to be provided at no cost. Competition in sell-side research is likely to rise; asset managers will be more selective for the research they buy. Then model will shift for research from unpriced to priced, from non transparent to fully transparent for the costs to asset managers for research and advisory services. Asset Managers are likely to spend less on research in a more priced environment. Asset Managers will probably enhance internal research division and in house corporate access. Smaller buy-side firms struggle for corporate access. We will then be assisted to ongoing pressure versus passive funds to deliver alpha. Buy-side players are expected to bring more the research process internally and hence direct engagement from IR teams will be more important. Notably, for smaller buy-side firms, sell-side research will be  relatively more expensive, and IR teams will need to find ways of identifying those smaller investors likely to demonstrate an interest in their story.

MIFID II will create a division between companies of different sizes: mega-caps decreasing research coverage from the sell side is not going to be an issue; the larger names will always be followed; for these companies an increase in the quality of coverage will be viewed as a potential benefit. But smaller companies may struggle to get sufficient sell-side coverage in a post-MIFID II world. Some of this companies  are already struggling to attract coverage today and this will be more complicated in the future.

For what concern the sell-side research, is expecting to be fewer analysts and then less attention for smaller companies. Rate cards for corporate access in a landscape where will operate fewer suppliers and new entrants are expecting. Also with regards to corporate access there will be less interest for small and mid-cap companies. Companies then must consider to organising some roadshows internally or ask to a corporate access company to help them in this.

Investor Relations Scenario

In this changing scenario IROs must be able today to navigate a complex landscape.  In terms of communicating the company’s message to the investment community, IR teams will be playing an increasingly important role as the sell-side is placed under greater scrutiny. The sell side, which will need to justify its unbundled fees to its users (investment managers), is expected to contract, and with a smaller sell side following, companies will need to find new ways of sharing their message with the buy side. As sell-side is placed under increased pressure, associated benefits that companies enjoy from their sell-side partners, such as support in the organization of roadshows, will start to drop. The burden of organizing and co-coordinating such events will fall on the shoulders of the corporate themselves, leveraging the help of external partners. This will be particularly true for companies in the mid to small-cap segment and those in niche or less popular sectors.

MIFID II is at the forefront of most IR teams’ mind, and there are various points that different teams and individuals are looking at. IRO’s must put a stronger emphasis on analyzing and understanding trends within their investor base, to support them in their approach to investor interaction. MIFID II follows alongside the trend of rising passive investing, which has grown more popular  in recent years. There are several things IROs can do about that, beginning with: how do you engage with passive shareholders? More and more companies are engaging with passive investors from a corporate governance standpoint and ESG factors.

Increasingly, investment managers are looking at the SRI/ESG toolkit as a way to ensure corporate governance and other ESG principles are given their due. Shareholder activism used to be a fairly exotic strategy, but now traditional, long-term, value and growth-oriented inves­tors are teaming up with activists in order to accomplish their goals. Recently, ESG has begun to be used as a tool of control for passive investors, too. When index investors look for ways to ensure the long-term focus of a management team aligns with their best interests, the mechanism for doing that is often corporate governance.

Applying a strategic approach to targeting prospective investors, accordingly allocating management time to the most efficient use is also a key concern and IRO’s must make more decisions and judgment on who is best to meet, deciding which investors to meet, identifying new pools of capital and fund flows, and enabling IR teams to prioritize the right institutions to meet with will be equally important.

Leveraging shareholders analyses will become increasingly central to the activities of IR teams, enabling listed companies to identify their top holders, but also going the extra step and explaining why the stock has attracted a given investor or been sold by another institution. This identification and understanding of a shareholder base is then used as the basis for strategic planning in terms of investor interaction, while providing a key measure for the effectiveness of an IR program.

This new scenario will lead IR team to a more efficient and strategic view of investor opportunities and a greater control for telling company story. IR team are also considering paying for independent research directly, despite the risk of perceived conflict of interest. Organizing roadshows themselves especially in their domestic market, without their brokers, is another change IR team are preparing for. Companies are considering which technologies to leverage to support them in future IR endeavors, while also re-considering the support of external IR Advisors.


  • MIFID II will exacerbate flows into passive funds and the need for transparency; ESG & SRI will as a result become more of a focus for investors.
  • The sell side model will likely change and become more competitive as margins on the buy side are squeezed. Research coverage and consensus, corporate access and advisory services will be affected
  • This shifting investment landscape makes it important for IROs to monitor trends in their shareholder base and sector, understand recent fund flows and prioritize investor opportunities and risks
  • Imminent introduction of MIFID II will put pressure on IR teams to think differently, be more efficient, consider new technologies and take control for distributing and communicating the company’s story.

Polytems Corporate Access (PCA)

Polytems Corporate Access provide Companies with the investor’s profiling, the analysis of the shareholders base, Investore Relations, Financial Communication and access to investors. Polytems support small and mid-cap companies in the organization of their roadshows in a wide range of formats. PCA team works to provide companies with the right entry point to investors and exclusive logistics on all major financial markets. We believe hosted events offer the investment community a unique opportunity to get in touch with some of the top small and middle-cap companies, some more and some less visible than others. PCA team will help Companies with a full suite of opportunities, a series of non-deal roadshows, and much more. We believe that the smooth execution of companies’ roadshow is a key factor for a company, It’s a matter of image and reputation.

PCA team can make the difference providing Companies a full range of efficient, comfortable, and elegant services.

Polytems is a Premium Partners Equity Markets of Borsa Italiana


Bianca Fersini Mastelloni is Chairman and CEO of Polytems HIR. She is a seasoned consultant in Corporate Communication with extensive experience for over 30 years. Since 1999 she is active in Investor Relations and Financial Communication for companies listed on the major financial markets. Bianca provides strategic IR, corporate access in Italy, Europe, USA, investor’s market intelligence, profiling investors, critical communication and reputation. A scholar of issues pertaining to Communications and Investor Relations. Bianca studied at SUNY – State University of New York, Buffalo and at Boston University, Boston, and she works as lecturer with some Italian University. Bianca is author of the book Investor Relations ed Etica , Efficacia e Vantaggi Competitivi - edited from Guerini e Associati - as of as several articles about Investor Relations and financial communication.