FCA reveals final MiFID II rules
04 July 2017 London
Image: Shutterstock
The UK’s Financial Conduct Authority (FCA) has revised some of its proposals on implementation of the second Markets in Financial Instruments Directive (MiFID II), issuing its final rules and guidance on the directive.
The FCA’s policy statement sets out the ways in which the UK’s policy will go beyond the requirements of the EU legislation, but noted that the authority has an obligation to consider the government’s economic policies when implementing it.
It says: “We have considered the benefits to consumers and to the integrity of the UK market of
our proposals, set against the costs for firms and therefore overall the extent to which
the UK remains attractive as a location for internationally active financial institutions.”
Particularly, the statement responded to consultation paper CP16/29, released in September 2016, which received 211 responses and caused the FCA to revise some of its proposals.
Inducement rules in relation to research will still be applied to collective portfolio managers, not only to investment firms that are subject to MiFID II.
However, the FCA amended its original proposal around how quickly charge deductions should be passed into an RPA, and clarified that it does not intend to require investment managers to have a single RPA per research budget
The FCA has reduced the threshold for the size of portfolio a local authority should have in order to opt in to professional client status, making it easier for local authorities acting on behalf of local government pension schemes to gain this status.
Also, best-execution rules under MiFID II will not be extended to alternative investment fund managers, as was originally proposed.
However, the FCA maintained that collective investment undertakings that are not UCITS will not be automatically considered either complex or non-complex. This includes non-UCITS retail schemes and investment trusts.
The statement said: “Most of what is in the MiFID II conduct provisions is familiar in the context of the existing UK regulatory framework. But, as well as the specific adjustments firms will need to make, their implementation presents an opportunity for firms to consider their existing approach to compliance and their efforts to put the interests of clients at the heart of what they do.”
“In this regard, having an effective governance structure and the right culture are crucial to implementing MiFID II successfully.”
The statement also noted that implementation of the directive before the 3 January 2018 deadline represents a challenge for firms, “particularly given that important issues concerning the interpretation of the legislation are still being resolved”.
However, it said: “We expect firms to take reasonable steps to meet this deadline.”
It went on: “Firms who still need to apply for authorisation or variation of permission should
prioritise as a matter of urgency their submission of complete applications.”
It added: “Such firms must have contingency plans in the event that by 3 January 2018 they do not have the required permissions.”
The FCA’s policy statement sets out the ways in which the UK’s policy will go beyond the requirements of the EU legislation, but noted that the authority has an obligation to consider the government’s economic policies when implementing it.
It says: “We have considered the benefits to consumers and to the integrity of the UK market of
our proposals, set against the costs for firms and therefore overall the extent to which
the UK remains attractive as a location for internationally active financial institutions.”
Particularly, the statement responded to consultation paper CP16/29, released in September 2016, which received 211 responses and caused the FCA to revise some of its proposals.
Inducement rules in relation to research will still be applied to collective portfolio managers, not only to investment firms that are subject to MiFID II.
However, the FCA amended its original proposal around how quickly charge deductions should be passed into an RPA, and clarified that it does not intend to require investment managers to have a single RPA per research budget
The FCA has reduced the threshold for the size of portfolio a local authority should have in order to opt in to professional client status, making it easier for local authorities acting on behalf of local government pension schemes to gain this status.
Also, best-execution rules under MiFID II will not be extended to alternative investment fund managers, as was originally proposed.
However, the FCA maintained that collective investment undertakings that are not UCITS will not be automatically considered either complex or non-complex. This includes non-UCITS retail schemes and investment trusts.
The statement said: “Most of what is in the MiFID II conduct provisions is familiar in the context of the existing UK regulatory framework. But, as well as the specific adjustments firms will need to make, their implementation presents an opportunity for firms to consider their existing approach to compliance and their efforts to put the interests of clients at the heart of what they do.”
“In this regard, having an effective governance structure and the right culture are crucial to implementing MiFID II successfully.”
The statement also noted that implementation of the directive before the 3 January 2018 deadline represents a challenge for firms, “particularly given that important issues concerning the interpretation of the legislation are still being resolved”.
However, it said: “We expect firms to take reasonable steps to meet this deadline.”
It went on: “Firms who still need to apply for authorisation or variation of permission should
prioritise as a matter of urgency their submission of complete applications.”
It added: “Such firms must have contingency plans in the event that by 3 January 2018 they do not have the required permissions.”
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