Financial Services Ireland

Wealth & Asset Management Reform – MiFID II

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Wealth & Asset Management Reform – MiFID II

The markets in Financial Instruments Directives (MiFID II) is set to introduce fundamental changes to the distribution of wealth and asset management products and services in the EU. These changes will affect asset managers and service providers in numerous ways, and the winners will be those who adapt their strategies and have the operational capability to respond effectively to the new environment. In this report, we look at how MiFID II will impact the asset management sector, the timeline for implementation and the key issues contained in the directive, including:

Investor protection/distribution

  • An EU-wide ban on independent financial advisers or discretionary portfolio managers accepting or retaining payments/inducements – effectively banning payment or retention of retrocessions or commissions to or by independent advisers or managers
  • Regulatory powers to ban products — likely to lead regulators to increasingly focus on product development, oversight and targeting of products
  • Enhanced provisions around suitability and appropriateness, particularly in relation to “complex” products
  • Alignment of the Insurance Mediation Directive II with the investor protection provisions of MiFID II

Market structures and transparency

  • Increasing requirements for formalisation of internal matching and crossing systems across different financial instruments
  • Limiting the volume of business that can be dealt on so-called “dark pools”
  • Increased pre- and post-trade transparency around equity and non-equity markets, including the development of a consolidated tape for post-trade data
  • Widening the application of the rules to a wider range of commodity derivatives and including position limits around such derivatives
  • Stricter controls on algorithmic trading
  • Open, non-discriminatory access to trading venues and central counterparties – vertically integrated trading venues and central counterparties (CCPs) to open up after a transition period

Governance

  • Enhanced requirements around governing bodies of investment firms, including around diversity and compliance, as well as ensuring that members have sufficient time to undertake their duties

Access by third-country firms

  • A harmonised regime for granting access to EU markets for firms operating from third countries, dealing with professional investors and eligible counterparties, based on equivalence assessment of third-country jurisdictions by the European Commission; where firms are dealing with retail customers,
    Member States may require a branch to be established in their jurisdiction

Please click the link below for the full report.

Brian Binchy

FS Regulatory Advisory Director
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