SMFSC Proposes New Model for Investment Research Payments

SMFSC Unveils Plans to Reform How Investment Research Is Funded

The San Marino Financial Standard Council (SMFSC) has announced proposals to introduce a new model for paying for investment research, aiming to increase transparency, reduce conflicts of interest, and enhance the quality of market analysis available to investors.

The move forms part of SMFSC’s broader strategy to modernize San Marino’s financial services landscape and align it with global best practices in research independence and investor protection.

Addressing Concerns Over Research Funding and Independence

Investment research has long played a vital role in helping asset managers and institutional investors make informed decisions.
However, under traditional funding models, research costs were often bundled into trading commissions, creating potential conflicts of interest and reducing cost transparency for end investors.

SMFSC’s proposal seeks to decouple research payments from trading activities, ensuring that investors can clearly identify how much they pay for research and what value they receive in return.

“Our objective is to create a system that rewards quality, independence, and transparency,” an SMFSC spokesperson explained.
“By reforming how research is funded, we strengthen trust in the information that guides investment decisions.”

Proposed Features of the New Framework

The new funding approach proposed by SMFSC includes several key elements:

• Unbundled research payments: Asset managers would pay explicitly for research rather than incorporating costs into trading fees.
  
• Enhanced disclosure obligations: Firms would be required to report research expenses separately, improving accountability to clients and investors.
  
• Flexible payment mechanisms: The framework allows for both direct payments and research payment accounts (RPAs), giving firms choice while maintaining transparency.
  
• Quality standards for research providers: Independent analysts and institutions would be subject to ethical and methodological criteria set by SMFSC to ensure objectivity.
  

This model mirrors successful practices adopted in leading financial jurisdictions while reflecting SMFSC’s own commitment to self-regulatory innovation.

Balancing Transparency with Market Efficiency

SMFSC emphasized that the proposed framework aims to strike a balance between transparency and practicality, ensuring smaller investment firms are not overburdened by administrative complexity.
The council is exploring proportional compliance measures that would allow firms of different sizes to adopt the model smoothly.

At the same time, SMFSC’s consultation paper invites feedback from investment managers, brokers, research providers, and investor groups, ensuring that the final framework reflects diverse industry perspectives.

A Step Toward Greater Investor Confidence

By increasing visibility around how research is funded and consumed, SMFSC hopes to strengthen market integrity and restore investor confidence in financial analysis.
The council noted that transparent payment structures not only promote better research quality but also encourage competition among research providers, leading to improved insights for the market as a whole.

“High-quality, independent research is the cornerstone of sound investment,” SMFSC stated.
“Our reforms ensure that value—not volume—drives the research ecosystem.”

Next Steps in the Consultation Process

SMFSC’s consultation on the new research payment model will remain open for several months.
Following stakeholder feedback, the council plans to publish finalized guidance and implementation timelines later in 2025.
Firms will then be expected to transition to the new framework gradually, with SMFSC providing support and educational materials to assist compliance.

Conclusion: Modernizing Financial Transparency

The SMFSC’s proposal represents a forward-looking reform that places transparency, independence, and investor trust at the heart of market practice.
By redefining how research is paid for, the council is laying the foundation for a more accountable and innovation-driven investment ecosystem—one that ensures financial information serves the public good, not hidden incentives.