This week, in a speech, Financial Conduct Authority (FCA) enforcement and market oversight executive director Mark Steward set out the regulator’s approach to enforcing the MiFID II regulations when they come into play next January.
What do you need to do to comply with the Directive?
The Markets in Financial Instruments Directive II comes into force on 3 January 2018.
In March 2017, the FCA published near-final details of the new regulation.
The new directive will have specific implications for financial promotions. Read more about the 4 things you need to do now about MiFID II and financial promotions.
How will MiFID II benefit the regulator?
The new requirements mean that the FCA will have significantly increased amounts of data at its disposal. Collecting data under MiFID II – alongside cloud-based data gathering which the regulator is working on – will, in Steward’s words, create ‘a sea change in our ability to view the whole market’.
He expects this to enable the regulator to identify serious misconduct earlier, as well as giving the Authority a better understanding of the market that it supervises.
How will the FCA deal with firms that aren’t ready?
In his speech to the AFME European Compliance and Legal Conference 2017, Steward recognised that the market wants to understand how the regulator will enforce non-compliance with the new directive.
He also acknowledged the scale of the task facing firms, saying that ‘We are very aware of how much work many firms have been engaged in for a very long time now in re-tooling and preparing for next year’.
Steward stressed that the FCA will respond ‘proportionately’ to firms that are not ready in time, In this case this means that the regulator ‘will not take a strict liability approach, especially given the size, complexity and magnitude of the changes that are required’.
Attempts to comply will be looked on favourably
Steward noted that the regulator’s approach will be very different for those firms who have tried but struggled to comply fully, and those who ‘have made no real or genuine attempt to be ready or where key obligations have been deliberately flouted’.
In practice, this means that the FCA has ‘no intention of taking enforcement action against firms for not meeting all requirements straight away where there is evidence they have taken sufficient steps to meet the new obligations by the start date, January 2018’.
What do you need to do now?
If your firm is not yet authorised for MiFID II activities, or needs variations of permission – act now.
You should have submitted your completed applications for authorisation or variations of permission by 3 July 2017. Although many firms met this deadline, some have not. If yours is one of these, you need to rectify this.
If you are a legal entity, or an individual acting in a business capacity, and a client of a firm subject to MiFID II transaction reporting obligations (or one of these firms), you need a Legal Entity Identifier (LEI) if you wish to carry out transactions after 3 January 2018. Firms are responsible for ensuring these clients have an LEI before they effect transactions covered by MiFID II on their behalf.
In addition, you should review the requirements for financial promotions under the new rules and identify the actions you need to take – which might include auditing your existing FPs, reviewing your approvals process and understanding the rules around disclosure of fees and charges.
Good progress, with more to do
Steward closed by saying that many firms have ‘been working well to prepare for next year’ and that they ‘should feel assured and confident that they can continue to work with [the FCA] to meet the starting line’.
Source: Perivan Technology
How can we help you?
LS Consultancy has wealth of experience in reviewing financial promotions and can do so on a one-off or on an on-going basis.
We are also skilled in reviewing and assessing your financial promotion procedures and can assist you to establish the necessary framework to help future compliance with regulatory requirements.
Remember: Not everything is black and white when it comes to Financial Promotions, and many of the rules are open to interpretation. If you are unsure how your activities fit within the rules, please contact us.