FCA to ask firms for their views on MiFID II implementation

The Financial Conduct Authority (FCA) is seeking early views from firms, trade bodies and consumer groups on how it might implement certain aspects of the recast Markets in Financial Instruments Directive, known as MiFID II.

One of the aims of MiFID II is to reinforce investor protection standards by strengthening conduct of business and organisational requirements. The FCA has policy choices to make in some areas on how MiFID II is implemented in the UK and is asking for views before it consults more extensively on rule changes at the end of the year, once MiFID II’s implementing measures are finalised.

David Geale, director of policy at the FCA, said:

“MiFID is a very significant piece of legislation with implications for many of the firms that we regulate and they all need to start planning for the Directive’s implementation.

“We have policy choices to make on some areas of how the Directive applies in the UK, but not in all, and this paper sets out what those are. In those areas where we can be flexible in our approach, we want firms, large and small, to have an opportunity to give us their early views on the changes we are considering.”

The discussion paper requests views on the following topics:

  • The extent to which the FCA should apply MiFID II provisions to insurance-based investment products and pensions.
  • How the FCA should incorporate MiFID II’s investor protection measures for structured deposits into its Handbook.
  • Whether the FCA should ban third party rebating for discretionary investment management firms.
  • Options for the assessment of local authorities requesting to be treated as professional clients.
  • Details on MiFID II’s approach to adviser independence, and how this could be implemented for advice on shares, bonds, derivatives and structured deposits.
  • Whether and how the FCA might apply sales-staff remuneration rules to firms not covered by MiFID II, in light of domestic and European policy developments.
  • How the FCA might apply recording of telephone conversations and electronic communications requirement to firms which fall within MiFID’s Article 3 exemption, which includes independent financial advisers and corporate finance boutiques; and whether to remove the current recording exemptions for discretionary investment managers in our domestic regime.
  • How MiFID II’s requirements on costs and charges disclosure could be implemented practically.
  • Exploring potential MiFID II inducement rules for advisers, discretionary investment managers and other firms.

The paper also details the FCA’s expectations of the likely restrictions on products that can be classified as non-complex and the practical application of the appropriateness test to a wider range of complex products.

Those with comments on the discussion paper have until 26 May 2015 to fill in an online response form, or to write to the FCA with their views.

The EU legislative timetable for the implementation of MiFID II is challenging. The European Commission is likely to publish the MiFID II implementing measures later this year.

Following that, and allowing time for feedback on the discussion paper to be considered, the FCA intends to consult on the necessary changes to its Handbook towards the end of the year. The FCA will confirm final rules by July 2016, by which time EU Member States must have transposed MiFID II into national laws and regulations.

This is to give firms as much time as possible to respond to the consultation and to implement the required changes ahead of MiFID II taking effect on 3 January 2017, the date from which firms will need to comply with MiFID II.

The FCA has published a timeline today, to set out to firms how MiFID II will be implemented.

Notes to editors

  1. Discussion Paper: Developing our approach to implementing MiFID II conduct of business and organisational requirements
  2. A timeline of MiFID II implementation
  3. Further information on MiFID II.
  4. On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
  5. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
  6. Find out more information about the FCA.