October 23, 2021

Volume XI, Number 296

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October 22, 2021

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October 21, 2021

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It's just another manic MiFID 2 day

As the UK returns to work for the New Year, we spare a thought for those who have spent much of the festive period ensuring their businesses are MiFID-2 ready. Finally it is 3 January 2018, the day on which investment firms across the EEA need to be compliant with the new provisions. And, even though the original "Level 1" legislation was finalised back in 2014, the complexity of the supporting measures, with attendant delays, have made national implementation a challenge. In turn, firms had to start their preparations before knowing their finalised domestic requirements in order to meet the relevant deadlines.

10 key changes

As a reminder, among the key changes MiFID 2 has introduced are:

  • Additions and refinements to the lists of investment services and activities and financial instruments, including the creation of a new type of trading venue, and also restrictions on use of previously available exemptions

  • New requirements for pre- and post-trading transparency for a wide range of financial instruments, new granularity to transaction reporting and tighter requirements on best execution

  • Applying some investor protection rules to a wider range of customers while introducing some new requirements

  • Revamping requirements on disclosure, costs, charges and inducements, including an obligation to unbundle the cost of research

  • Overhauling the advisory regime

  • New requirements around product governance

  • Introducing new controls on commodity traders and trading

  • A new regime for supervising data reporting service providers

  • A new trading obligation

  • Creating product intervention powers for regulators.

10 Points for your checklist

Firms should have carried out detailed RAG analyses and put in place plans for change. It is a useful exercise to check everything has been properly addressed. Different business models will lead to different priorities, but 10 critical questions could be:

  • Have you checked you have all the permissions and passports that you need, and none that you don't?

  • Could you take advantage of the Article 3 exemption? If so, have you done so? 

  • If you previously relied on an Article 2 exemption, can you still do so?

  • Have you reviewed your governance and organisational controls against the requirements of the MiFID Organisational Regulation and SYSC?

  • Have you complied with the communication recording requirements?

  • If you use research, have you assessed this (and other services you receive) against the inducements requirements?

  • If you provide advice, have you addressed the way in which you do so, and notified clients accordingly?

  • If you are involed in product design or distribution, have you addressed the product governance requirements?

  • Have you amended your client-facing agreements, including those for DEA clients, and notified clients of changes?

  • Have you assessed the application of transaction reporting requirements, including gathering all client LEIs, and put in place arrangements to comply?

Did you run out of time?

There is no excuse to say you weren't warned about MiFID 2. FCA has published guidance and information as soon as it was able to do so, including its guide on applications and notifications, and published changes to its rules as soon as it was able. Nevertheless, it's been a scramble for many firms. FCA has recognised this. While this means it is unlikely to take action against firms that have not absolutely completed their MiFID 2 preparations by 3 January, it has made it clear that it expects firms to have tried their best and to keep the momentum going towards full compliance as soon as possible.

Copyright © 2021 Womble Bond Dickinson (US) LLP All Rights Reserved.National Law Review, Volume VIII, Number 3
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About this Author

Andrew Barber, Partner, Womble
Partner

Andrew is a partner that leads the financial services team in Womble Bond Dickinson's banking and financial services team. He specialises in financial services regulation with a the largest portion of his practice focusing on retail banking and consumer finance matters.

+44 (0)207 788 2334
Emma Radmore, Womble Dickinson Law Firm, United Kingdom, Finance Law Attorney
Legal Director

Emma joined the firm in August 2016. She has over 20 years' experience of specialising in financial services regulation. Emma advises UK and international clients on compliance with all aspects of financial regulation and prevention of financial crime.

Emma acts for a range of regulated clients including banks, fund managers, investment firms, insurance firms and other retail intermediaries.

440207-788-2372
Roseyna Jahangir attorney Womble London
Attorney

Roseyna is a member of the financial services team. She works with clients ranging from banks and insurers to new entrants to the markets and companies for whom financial services are non-core activities; she assists clients in achieving their commercial objectives while operating within and complying with the applicable regulatory requirements. 

Roseyna provides practical advice and assistance on a broad range of financial services issues, including the requirements of the Financial Services and Markets Act and the Consumer Credit Act and...

+44 (0)20 7788 2377
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