European Securities and Markets Authority consults on EU code of conduct for issuer-sponsored research

The European Securities and Markets Authority has published a consultation on draft regulatory technical standards to establish an EU code of conduct for issuer-sponsored research. When final, the RTS will supplement the revised Markets in Financial Instruments Directive, as amended by the Listing Act Directive, which provides that investment firms distributing to clients or potential clients research that is paid for, fully or partially, by an issuer, is labelled as issuer-sponsored research.

Only research that is prepared in accordance with an EU code of practice may be labelled issuer-sponsored research. The code of conduct sets out standards of independence and objectivity for research providers and specifies procedures and measures for the effective identification, prevention, and disclosure of conflicts of interest, with a view to enhancing the trust in and use of issuer-sponsored research. In its proposals ESMA indicates that: (i) issuers and research providers should only enter into an agreement where the minimal initial term of the contract is two years and where, at minimum, 50% of the annual remuneration is paid upfront; (ii) research providers should establish, implement and maintain an effective conflicts of interest policy; and (iii) research that is fully paid for by the issuer should be made public immediately. Investment firms will also be expected to ensure that all issuer-sponsored research that they produce or intend to distribute to (potential) clients complies with the code of conduct. The consultation is primarily aimed at research providers, issuers, investment firms, and investors. The deadline for comments is March 18, 2025. ESMA expects to publish a final report and submit the draft technical standards to the EC for endorsement by December 5, 2025.

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