With such an extensive reform as MiFID II there are areas where the regulators are very specific about what they want to see in place from 3 January 2018. Yet elsewhere, they are leaving it to the industry to propose implementation standards and best practices.
Given the broad range of clients, models and scenarios across our solution, we are continuing to facilitate client workshops and participate in industry working groups. Our most recent workshop covered product governance and TR for corporate actions. We have also been providing our input on topical industry pieces and recommend the Professional Adviser article and its comments, "Pressure Builds on Platforms for Urgent Solutions to MiFID II 10% Rule."
This second MiFID II briefing will look at some more key areas and includes multi-fills, control reporting, understanding the status of third parties for reporting purposes and product governance.
The Hot Topics
ESMA has asked the industry to use INTCas a notional accounting principle to accurately report multi-fills in order to reflect the correct allocations and price to each customer in an underlying order.
Product governance reporting
There is a huge amount of information to be shared across the market and some may want to receive this information more frequently.
The frequency and format of the product information is being debated at a high level between trade bodies and it is important to keep an eye on the outcome of their deliberations -along with any significant views forthcoming from regulators.
You will need to alert a fund manufacturer where a breach may have happened in the context of its target market criteria. For example, a fund restricted to institutional investors that has been offered to retail investors. In addition, you need to determine your own target market and distribution criteria.
Who owns the client relationship?
There is ongoing consideration on exactly who is responsible to the client in a chain of relationships. This might include an IFA, a wealth manager, a platform with internal and external funds, and discretionary fund managers. The key questions are which firm has responsibility for initial advice?
Who has responsibility for the ongoing advice, including recommendations on DFM’s? Who has responsibility for client communication? We’ve been party to a number of discussions with firms on this over the past year, and read with interest about a troubled DFM in a recent article published by Wealth Manager.
Latest ESMA Q&A (as at 3 October)
You can find updates on themes including costs and charges, best execution, suitability and appropriateness along with other relevant information.
Specifically, on costs and charges clarifications include;
- Firms needing to explicitly state ‘zero’ where individual charges do not have a cost
- Where a client relationship ends mid-2018, firms needing to provide information at period end
- Where part of the relationship falls under MiFID I, firms can choose on a best efforts basis to calculate the costs and charges in line with MiFID II or provide two separate breakdowns with clear explanations
The Investment Association has published some guidelines discussing what kinds of corporate actions could be reportable. They are seeking to make CA’s non-reportable in their entirety and will position their views with ESMA.
Dates to watch out for
4 January, 2018 – deadline for comments on FCA’s proposed rules for standardized disclosure of costs.
How we can help
Partnering with our clients to support them in achieving regulatory compliance is a key feature of our service. Many of our clients have told us how much they value this service and the level of partnership we offer on regulation.
For more information on working with us and our regulatory services, please contact me.