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MiFID II Level 2
Investor protection matters
Bovill Briefing
February 2015
Fiona Richardson and Mark Spiers/Rebecca Thorpe
2
Christmas came early!
19 December 2014
Making markets more robust
3
MiFID II aims to:
make financial markets more robust and
efficient
take account of technological developments
since MiFID I
increase transparency of both equity and
non-equity markets
introduce a stricter framework for commodity
derivatives markets
reinforce supervisory powers
strengthen investor protection.
Understanding the levels of detail
4
Level 1 – Framework Legislation
• Delegated and Implementing Acts
Level 2 – Implementing Measures
• Implementing Technical Standards and Regulatory Technical Standards
Level 2.5 – Technical Standards
• ESMA issue non-binding guidance on the meaning of the Levels 1 and 2
• National regulators comply or explain
Level 3 – Regulatory convergence
• Enforcement action by EC for failure to implement or inconsistent implementation
Level 4 – Enforcement of Directive
Recast MiFID
MiFIR MiFID
II
MiFID II timeline
5
2014 2015 2016 2017
Legis
lation
ESMA Level Two
Advice to EC
[19/12/14]
Level One entry
into force
[02/07/14]
Level Two
Published in OJ
[Due 03/01/16]
MiFID II applies
[03/01/17]
RTS to EC
[Due 03/07/15]
National
Transposition
[Due 03/07/16]
ITS to EC
[Due 03/01/16]
You are Here
What is in MiFID II?
6
MiFID (Directive)
Scope – Exemptions and Definitions
Authorisation
Corporate Governance
Conflicts of Interest
Inducements and Commissions
Client Categorisation
Product Governance
Best Execution
Algorithmic Trading
Passporting
Third Country Firms – Branch
MiFIR (Regulation)
Third Country Firms – Cross Border
Pre and Post Trade Transparency
Trading Obligations
Consolidated Tape
Transaction Reporting
Product Intervention
Telephone recording
Information to clients
Reporting Client
Agreements
Appropriateness Suitability
Fair, Clear and not Misleading Remuneration
Conflicts Product Governance
Record Keeping
Complaints
Advice
Client Assets
The investor protection hopper
7
Compliance
Inducements
Strengthened investor protection
Underwriting and Placing
ECPs Best Execution
Client Order Handling
Product Intervention
Key themes
8
Retail standards being applied to
Professional clients Board sign off
Senior Management oversight
Role of Compliance
Disclosure
Planning ahead
9
“Firms will need to start planning for
the changes ahead of the finalisation
of the EU implementing legislation and
the subsequent changes we make to
our Handbook and the Treasury
makes to financial services legislation”
Financial Conduct Authority website
“The devil is in the detail”
MiFID I lessons:
• Senior management responsibility
• Proper project governance
• Gaps must be owned by the business
not compliance
• Robust tracking of compliance
• Expect questions from clients and
regulators
Learning from MiFID I
10
• What rules apply to my business?
• Have they changed from MIFID I?
• If so do I need to take action?
• If I do need to take action what exactly do I need to do,
and what is the effort needed?
• Who do I need to engage with, when and how?
Rule triage
11
Engaging the whole firm
12
There is a lot of content in MiFID II
Don’t wait for FCA rules or even the final EU legislation
START PLANNING FOR MiFID II NOW!
Have you started yet?
13
• read
• ascertain gaps
• develop solutions
• identify opportunities
Analysis and
planning
• change
• test
• train
• client contact
Implement
Yo
ur
pro
ject
Questions?
14