FCA publishes near final rules on MiFID II and encourages firms to submit applications for MiFID II authorisation

The FCA is also providing an update on the taping of telephone conversations by retail financial advisers.

Firms impacted by the changes to the activities and instruments covered by MiFID II should now apply for authorisation or for variations of permission, or risk being unable to operate in the UK market after 3 January 2018, when MiFID II takes effect.

The near final rules cover:

• the new category of firms - data reporting services providers
• position limits and reporting for commodity derivatives
• systems and controls requirements for firms providing MiFID investment services

In June, the FCA plans to finalise the MiFID II rules in a further policy statement. This will cover remaining issues which include conduct of business, perimeter guidance, and client asset protections. 

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, said:

“MiFID II introduces substantial and wide ranging measures designed to improve investor protection and promote market integrity.

“Some firms will need to be authorised for the first time, others will need to vary their current permissions.

“It is critical that those firms submit their applications now. The FCA does not expect to make any significant changes to these rules before they are finalised in June this year, and therefore firms should not delay.”

Organisations affected by MiFID II include investment banks, interdealer brokers, high frequency traders, trading venues, stockbrokers, investment managers, commodity derivatives traders and financial advisers, and the two new types of authorised entity: organised trading facilities and data reporting services providers.

Taping of telephone conversations

This statement also updates firms on the approach the FCA will take to the recording of telephone conversations by retail financial adviser firms.

Having considered consultation feedback in the context of MiFID requirements, the FCA agrees that the business model of many of these firms means that a full taping obligation may not always be appropriate. The FCA will allow retail financial advisers to comply with the ‘at least analogous’ requirement by either taping all relevant phone conversations or taking a written note of those conversations.

The FCA also published today a fifth MiFID II Consultation Paper, which covers new rules for occupational pension scheme firms, and the extension of the FCA powers within the enforcement guide and decision procedures and penalties manual.

Notes to editors

1. Policy Statement - PS17/5: Markets in Financial Instruments Directive II implementation – Policy Statement I[1]
2. Consultation Paper - CP17/8: Markets in Financial Instruments Directive II Implementation – Consultation Paper V[2]
3. Further information on MiFID II can be found on the directive's dedicated section of the website[3].
4. MiFID was introduced in 2007, and set the regulatory framework for the buying, selling and organised trading of shares, bonds, units in collective investment schemes and derivatives across the European Union.  MiFID II revises the original directive to introduce substantial and wide ranging measures designed to improve investor protection and promote market integrity, and to meet G20 commitments on reforming and strengthening derivatives markets.
5. Retail financial adviser firms referred to are those MiFID optionally exempt Article 3 firms for whom the FCA consulted on whether to apply taping rules to them in CP16/29.
6. On 1 April 2013, the 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).
7. 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.
8. Find out more information about the FCA[4].