Which of the following is necessary for a firm to use third-party research?

The necessity for a firm to fund a research payment account is rooted in regulatory requirements designed to enhance transparency and protect the integrity of the research process. By funding a research payment account, a firm ensures that it can compensate third-party research providers without entangling these payments with execution costs or other service fees related to client transactions. This separation promotes ethical practices in investment research and aligns with regulatory frameworks that seek to prevent conflicts of interest.

When firms establish a research payment account, they demonstrate a commitment to fair treatment of research providers and maintain a clear line of funding for research services. This is particularly important under the MiFID II regulations, which emphasize the need for clear disclosures and adherence to best execution standards. This requirement supports firms in providing clients with high-quality research while ensuring that clients are only charged for services they benefit from directly.