MiFID II: financial promotions what you need to know

Jul 28th '17

In this blog, we explore in more detail the impact of the Markets in Financial Instruments Directive II (MiFID) regulation on marketing communications and financial promotions.


How will MiFID II impact financial promotions?

The Markets in Financial Instruments Directive comes into force in January 2018, and the near-final detail of the new regulation was published by the Financial Conduct Authority (FCA) in March this year.


Here we look specifically at the changes you need to make to your marketing and client communications once it comes into force.


Just how will the Directive affect marketing and financial promotions?


The changes MiFID II will introduce

The regulation introduces new or enhanced requirements in two main areas, covering:


  • the content of financial promotions and marketing material
  • the disclosure of fees and charges to clients


What are the key changes?

The changes to financial promotions rules can be found in Article 44 of the Delegated Regulation (Organisational Requirements).


For firms, one of the main changes is the requirement to treat professional (institutional) investors in the same way as retail ones. Communications with professional clients will now be classed as financial promotions, and regulated as such.


The enhanced requirements on fees and charges disclosures (found in Article 50 of the same Delegated Regulation) will also impact communications and marketing materials, demanding that firms disclose significantly more information than currently required. This will apply not just to sales materials, but to ongoing communications throughout the client relationship.


Two main points of difference from existing rules

The changes introduced under MiFID II comprise:


  • new requirements regarding specific information that needs to be included in marketing materials and communications
  • a more general focus on the need for marketing collateral and financial promotions to be ‘fair, clear and not misleading’


New requirements

The new requirements can be summarised as follows:


  • Risk warnings. While risk warnings are already compulsory on material citing potential returns and benefits, this will be extended under MiFID II.
  • Prominence and formatting. Again, current rules demand that risk warnings are displayed prominently.  The new regulation builds on this, with firms having to ensure that both the layout and font size of risk warnings make them as prominent as the rest of the text.
  • Future performance statements. Information on future performance will need to become far more detailed in future, including information on how investments might perform in both strong and weak market conditions.
  • Being fair, clear and not misleading


The requirement for communications to be fair, clear and not misleading, is not new – it was introduced under MiFID.


What changes under MiFID II is the need for firms to apply this to professional clients as well as retail ones.


This may require firms to reconsider their existing materials for professional investors. It may also mean that Compliance teams have to take a stricter approach in future when it comes to considering the level of understanding assumed in marketing materials.


Four things Compliance teams should do now

So what should your team, and your business as a whole, be doing to ensure you’re prepared for the Directive?


  • Start now

You may have a large amount of existing material to update in order to meet the new requirements. At the very least, as a Compliance team, you will need to review all your financial promotions to see which need updating.


This type of audit takes time. Make a start as soon as possible, if you haven’t already.


  • Revisit your approvals process

If you have existing approvals checklists, they will need updating to reflect the new requirements. You may also need to strengthen your processes around record keeping to ensure you create a compliant audit trail.


Automating some of your approval processes can help to prevent regulatory compliance breaches and may be worth investigating.


  • Educate your firm 

Make sure everyone responsible for writing and producing marketing content is aware of the changes.


As a Compliance team, you can help your Sales and Marketing colleagues to understand what’s needed so they can write content you can approve first time.


Make it easy for the business to find accurate data

The fees and charges disclosure requirements will be a challenge for many firms. The amount of data that needs to be updated and presented accurately on a regular basis creates substantial obligations.


While there is no set template for displaying this information, it is vital that it is clear and accurate. You need to work out now how you will gather and present it.


Online slide libraries can help, locking down pre-approved content and automatically pulling through updated statistics, charts and other corporate information into all slides where they appear. This sort of automation could be very helpful in enabling you to meet your obligations here.


Find out more about the impact of the new rules

Hopefully this given you an insight into the ways the new Directive will impact your marketing collateral and financial promotions.


But this is just one aspect of the new regulations.  There is much more detail about them and the impact they will have on your Compliance processes.

About us

LS Consultancy are experts in Marketing and Compliance, and work with a range of firms to assist with improving their documents, processes and systems to mitigate any risk.


We provide a cost-effective and timely bespoke copy advice and copy development services to make sure all your advertising and campaigns are compliant, clear and suitable for their purpose.


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