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Deadline imminent for responses to FCA’s MiFID II paper

With adviser independence and remuneration under discussion, advisers should read the FCA’s MiFID II discussion paper and let the regulator have their feedback by 26 May 2015

Advisers should read and respond to the discussion paper on MiFID II recently published by the FCA and where they have a view, let the regulator know it.

The FCA MiFID II discussion paper requires comments by 26 May 2015. Notably, questions the FCA is asking of the market are on:

• The definition of independence

• The scope of retail investment products; and

• Remuneration, including incentive schemes.

Alongside asking whether MiFID II’s standard of independent advice is different, in practice, to the UK’s RDR standard, the paper queries whether insurance-based investments and pensions should be included within the definition of ‘retail investment product’ and whether the regulator should explore applying MiFID II’s remuneration standards for sales staff and advisers to non-MiFID business.

In respect of the scope of products, for restricted advisers there is less of an issue as they determine the scope of the products anyway but there are likely to be consequences for holistic financial planning firms that provide independent advice.

The original Markets in Financial Instruments Directive (MiFID) was implemented in November 2007 and legislative proposal for the revision, known as MiFID II, was adopted in October 2011. The proposals are for a revised Directive and a new Regulation designed to take into account developments in the trading environment since the implementation of MiFID in 2007, including advances in technology and gaps in transparency to investors and regulators. It is also a response to the financial crisis.

The European Parliament voted MiFID II through in April 2014 and implementation of the new measures will take effect from 3 January 2017.

The FCA is working towards meeting the legislative deadlines of 3 July 2016 for converting MiFID II into domestic laws and regulations (‘transposition”’), and 3 January 2017 for MiFID II (the directive) and MiFIR (the regulation) to take effect. As part of all of this, the FCA says, “we recognise that we need to communicate effectively with firms about the changes that MiFID II will bring.”

The regulator’s task is “to remove domestic provisions which conflict with the regulations,” it says. “A significant part of the Handbook changes we introduce will therefore involve removing existing rules which occupy the same space as provisions in European Union regulations. HM Treasury will also need to make consequential changes to our legislative powers. Transposition requires changes to UK legislation and to the Handbooks of the FCA and PRA.”

MiFID II is going to have an impact and independent financial advisers should read it and provide some views back to the regulator, which has to take action before the EU directive takes affect in January 2017. The more feedback the FCA receives the more certain it can be of market sentiment and the more help that will give it in positioning and representing the UK in discussions at European level.

Read the FCA discussion paper on MiFID II

Go to the FCA’s MiFID II online response form

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