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

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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

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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?

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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

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Compliance

Inducements

Strengthened investor protection

Underwriting and Placing

ECPs Best Execution

Client Order Handling

Product Intervention

Key themes

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Retail standards being applied to

Professional clients Board sign off

Senior Management oversight

Role of Compliance

Disclosure

Planning ahead

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“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

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• 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

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Engaging the whole firm

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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?

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• read

• ascertain gaps

• develop solutions

• identify opportunities

Analysis and

planning

• change

• test

• train

• client contact

Implement

Yo

ur

pro

ject

Questions?

14