MiFID II directive: Major change comes ahead


MiFID II directive: Major change comes ahead

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The MiFID II directive and the regulation was adopted by the European Parliament on 15 April 2014, the decision came to a close following some intense discussions. By the first quarter of 2018, all 28 EU member states will be on a level playing field.

The time left before MiFID II directive goes into force should be wisely employed to ensure compliance as from 4 January 2018. To do so, some key MiFID II directive topics already require attention and validation:

  • Definition of your business model strategy (e.g. distribution channels, advisory model, target clients and trade execution setup)
  • Definition and setup of client meeting reports for advisory clients
  • Selection of a transactional reporting tool and design of a Target Operating Model (TOM)
  • Transaction reporting field mapping, gap analysis and data collection, in line with your overall regulatory reporting strategy (i.e. SFTR, MAR, REMIT)
  • Mapping of charges and costs associated to products, including data maintenance setup
  • Definition of a product governance process in line with new investor protection requirements, for both manufacturing and distribution activities

MiFID II: General presentation

The MiFID II package introduces a range of measures, which seek to address consequences of MiFID I, and issues raised by the financial crisis, such as making financial markets more efficient, resilient and transparent, improving investor protection.

This revision will have a significant impact on both business strategy and operational processes implemented by firms. Today, it is time for firms to understand the key areas of impact on their business and start to plan for change. Although the challenges for firms to implement changes may be significant, firms should also consider the opportunities the reforms offer and focus their activities accordingly.

MiFID II combines the Markets in Financial Instruments Directive (MiFID) and the Markets in Financial Instruments Regulation (MiFIR).

Applicable from January 2018, MiFID II prohibits inducements for discretionary asset management and ‘independent’ advice, directly challenging business models and putting pressure on revenue of asset and wealth management. Moreover, MiFID II significantly enhances “operational” requirements of market structure, reporting and governance and also enhancing regulatory supervision.

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What will be the impact of MiFID II on the investment fund distribution landscape?

The European Union can trace its origins to 1958, and at the time of writing that is 57 years in which a concept has grown to be a reality for over 500 million people.

It has brought many successes and some frustrations in getting such a large group of peoples to live to a broad set of common criteria. Previously steady industries are challenged by new rules, competitors and marketplaces. Fund management has had its fair share of European regulation with successes such as UCITS and other challenges such as AIFMD, which has brought some frustration to the industry. Now the third iteration of MiFID I combined with competitive forces looks set to alter investment fund distribution in the 28 European Union Member States.

Within this context it is perhaps useful, even essential, to pause to reflect not just on the immediate causal impacts of MiFID II on the investment funds industry, but also to consider the wider context. Who buys funds and why? How do they buy them? Are distribution methods efficient and finally are funds themselves fit for purpose when we are talking about something as essential as savings and retirement provision?

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When EMIR met MiFIR : New trade reporting opportunities

MiFID II and Markets in Financial Instruments Regulation (MiFIR) are expected to come into force in 2018, and the first technical standard for the reporting requirements was published end of last year.

In line with EMIR on the post-trade side, MiFIR will address the trade side of the derivatives transactions and will also include additional product types in the reporting scope.

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Impact of MiFID II on financial services industry

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