It introduced a number of items including the mifid passport, client categorisation requirements, client order handling requirements, pre and post trade transparency requirements and requirements relating to investment firms ensuring that clients receive best execution. Mifid ii investor protection knowledge and competence. Mifid ii will create a whole raft of requirements that are designed to shape the way that firms conduct business, up and down the supply chain. Paper dealt with most of the investor protection issues in mifid ii. Mifid ii article 60 is applicable to investment firms providing portfolio management service. Using mifid 2 as a guide, the ffsa may, for example. Investor protection is one of the key drivers behind the regulation, meaning even if some elements do not directly impact advisers, they likely will clients. Article 1610 of the mifid ii directive prohibits firms from concluding ttcas with retail clients in any circumstances. The ffsa is currently expected to enter into force in 2016. Mifid ii is a european union packet of financial industry reform legislation, instituted to regulate financial markets, rolled out on january 3, 2018. Mifid iimifir empowered esma to propose regulatory technical standards rts and implementing technical standards its. The new investor protection regime 2 published a paper in 2010 consulting on changes to the directive, followed by formal proposals in october 2011. Mifid ii safeguarding of client assets hogan lovells.
Markets in financial instruments directive ii mifid ii accenture. The key assessment is the level of knowledge andor experience an investor. The revised markets in financial instruments directive and associated regulation together, mifid ii are eu financial markets legislation that took effect from 3 january, 2018. Ecb bond market contact group the first weeks under mifid ii. Markets in financial instruments directive ii the mifid ii directive as part of a raft of legislation to clear the way before the european elections in late may 2014. If not, what other information should esma consider.
In doing so, mifid ii and mifir support the objectives of the cmu, the digital finance agenda, and the sustainable finance agenda. Stricto sensu investor protection under the mifid ii. To that end, it is necessary to provide for the degree of harmonisation needed to offer investors a high level of protection and to allow investment firms to provide services throughout the union, being an internal market, on the basis of home country supervision. Mifid ii and investor protection whats new for asset managers. New brochure on investor protection rules mifid ii press release. Pdf mifid ii in relation to other investor protection. Mifid ii brought about a comprehensive overhaul of the european market structure and investor protection framework. In order that the mifid firms can comply with their obligations, there will likely be impacts on fund managers offering pooled fund products in both areas. Mifid ii faqs investor protection bny mellons pershing. Note that level 2 measures are likely to include conditions with.
Technical advice to the commission on mifid ii and mifir, 19 december 2014 esma20141569 the technical advice, chapter 2. Mifid, if successful, will achieve its economic objectives of financing the markets with investor savings, and thereby achieving the conventionally accepted theory of the macroeconomic function of financial markets. Product governance is a key improvement in mifid ii for investors and their protection. Mifid ii level 2 item 3 investor protection issues the. In this contribution the author explores the relationship between mifid ii and other recent eu legislation aiming at. Mifid ii will create new requirements for firms and fundamentally alter the structures of certain markets. Provide relevant training, including targeted training to individuals in key roles. This includes a revised markets in financial instruments directive directive 201465eu, mifid ii and a new markets in financial instruments regulation mifir. Priips key information document kid and complexity flag is now required for preinvestment suitability and appropriateness assessment. Investor protection mifid envisages two types of investor protection mechanisms. The markets in financial instruments directive mifid ii is a european union eu legislation for investment firms that provide certain services linked to financial instruments e. Mifid ii revises certain rules and regulations for investment firms and trading venues.
Whereas an overall definition of minor nonmonetary benefits is provided for in article 248 of mifid ii, and specific items are provided for in article 123 of the mifid ii delegated directive, recital 29 of the mifid ii delegated directive provides some further clarity in. Its main purpose is to bring more market transparency and protect clients against investing money without proper knowledge. Oct 20, 2015 investor protection under mifid ii by charlotte henry on october 20, 2015 posted in regulation and compliance, united kingdom the fca has published a speech from its recent mifid ii conference entitled investor protection under mifid ii. Since the main objective and subjectmatter of this directive is to. Mifid also introduced new and more extensive requirements for firms, in particular for their conduct of business and internal organisation. Ensure that training covers the more nuanced elements of mifid ii and enforces the standards embedded into policy 3. The author exercised a comprehensive approach to investor protection, developed around a financial instruments life cycle, and analysed whether mifid ii measures address the identified issues. Such regulatory framework, ruled by a specific section of the italian financial intermediation decree, aims to protect. The brochure should help raise consumers awareness of their rights and of. Mifid ii has tightened and added to the rules for investor protection in many areas. Consequently, the authors aim was to study mifid ii investor protection measures within the context of eleven local and foreign misselling cases. Mifid is made up of the following european legislation. Mifid ii investor protection mifid ii afm professionals. This page is intended to be continually edited and updated as and when new questions are received.
The table below sets out some of the key level 1, level 2 and level 3 mifid ii mifir provisions as regards investor protection. Market financial instruments directive ii mifid ii level 1. The mifid ii directive, in force since january 3, 2018, is intended to increase investor protection in the capital markets. A systematic overview of articles 2430 professor dr. Reply form for the consultation paper on mifid ii mifir. Mifid ii investor protection conduct of business global. The recitals note that the financial crisis has shown limits in the ability of nonretail clients to appreciate the risk of their investments. The objective of mifid ii is to make european financial markets more transparent and to strengthen the investor protection. The firm shall provide to the investor a periodic report unless such report has been provided by a third person. Mifid ii 12 june 2015 client agreements in mifid ii article 197 of the mifid i directive contains a highlevel obligation on firms to establish a written agreement with the client setting out the rights and obligations of the parties and the other terms applying to the services. Financial instruments trading, investment services and. Effectiveness and effi ciency of new regulations in the context of investor and consumer protection 2 1.
Mifid ii investor protection the revision of mifid i leads to important changes in rules and regulations with regard to investor protection. The mifid ii directive and the mifir regulation on markets in financial instruments constitute a comprehensive set of rules principally aimed at improving investor protection and increasing transparency of trading activity. Alignment of the insurance mediation directive ii with the investor protection provisions of mifid ii. Provisions for investor protection covering the entire lifecycle of. The mifid ii package introduces a range of measures, which seek to address consequences of mifid i, and issues raised by the financial crisis, such as making financial markets more efficient, resilient and transparent, improving investor protection. Necessary amendments and revisions to investor protection. For example, investment firms must provide more information about the costs of an investment service and about the independence of their investment advice. The revision of mifid i leads to important changes in rules and regulations with regard to investor protection. The investor protection is enhanced due to stricter and new rules of conduct under mifid ii. An examination of the new investor protection requirements that mifid ii will bring, comparing them with existing uk regulation and identifying the practical challenges they will pose. Part 2 considers the markets in financial instruments directive mifid, its central role in the harmonization of eu securities trading, and the intense debate that preceded its adoption. Recommendations made to a large number of 1 esma, final report.
Mifid ii article 50 is applicable for any investor distribution strategy, i. Although in many cases less onerous requirements apply for services to professional clients and ecps with the least onerous requirements applying to the latter, mi fid ii is explicitly aimed at increasing investor protection for all client types. Sep 03, 2019 mifid ii is a european union packet of financial industry reform legislation, instituted to regulate financial markets, rolled out on january 3, 2018. The conduct focus of mifid has been expanded in mifid ii to strengthen investor protection. Mifid ii and mifir in our view represent both, a considerable. Investor protection under mifid ii financial services.
On the one hand, firms will have to provide their clients with information about the investment firm, the services it provides and the financial instruments that are the object of these services. Mifid ii implementation challenges and investor protection. Best execution what constitutes other liquidity provider under recital 7 of rts 27. Review trade surveillance arrangements to ensure their sustainability 4. Mifid ii introduces an additional requirement for the knowledge and competence of staff that informs and advises customers. The protracted legislative process is testament to the scope and complexity of these comprehensive reforms. Nevertheless, the question remains are the investor protection provisions of mifid an investor blessing or an investor execution. Mifid ii presents one of the biggest regulatory challenges the uk wealth management industry has faced in recent years. Mifid ii extends some existing investor protection requirements to eligible counterparties.
On 25 may 2018, the european securities and markets authority published an updated questions and answers on mifid ii and mifir investor protection and intermediaries topics. The first markets in financial instruments directive mifid i became effective on 1 november 2007. Part 3 provides deeper legal analysis of the mifid and other core harmonization measures, including the prospectus and transparency directives. The evolution of financial markets has exposed the need to strengthen the framework for the regulation of markets in financial instruments, including where trading in such markets takes place overthecounter otc, in order to increase transparency, better protect investors, reinforce confidence, address unregulated areas, and ensure that. Wpic research in a mifid ii context platinum investment. To that end, that directive aimed to harmonise the initial authorisation and operating requirements for investment firms including. The investor protection framework set out in mifid ii aims to ensure that investment firms act in the best interest of their clients, using a number of different approaches. Mifid 2 what impact will mifid 2 and mifir have on. The study of the interaction between different pieces of eu financial legislation becomes ever more important and difficult. Mifid ii context asset manager compliance department edition. The fsma, the financial services and markets authority, publishes a new educational brochure presenting a summary of the rules arising from mifid i and mifid ii. Mifid ii cfinancials big data technology for investor protection.
The european securities and markets authority esma has published an. Require the publication of a prospectus for any public offering of securities and of a key investor document for complex financial products with possible exceptions. This revision will have a significant impact on both business strategy and operational processes. Product governance and product intervention to prevent harmful products from reaching the market or from reaching unsuitable clients, mifid ii introduces mandatory ex. Mifid ii investor protection 8 the conduct focus of mifid has been expanded in mifid ii to strengthen investor protection. One of the main purposes of mifid is to harmonise investor protection and market transparency throughout europe.
While it should be confirmed that conduct of business rules should be enforced in respect of those investors. This new legislative framework will strengthen investor protection and. For example, investment firms must provide more information about the costs of an investment service and about. The main objectives of mifid ii include the pursuit of harmonised regulation across eu financial markets, increased competition between eu financial markets, ensuring appropriate levels of investor protection, and strengthening of supervisory powers. The revised markets in financial instruments directive and new markets in financial instruments regulation collectively known as mifid ii represented a comprehensive and profound reshaping of how eu financial markets, products and services and the relationship between financial services firms and their customers are regulated. An overview of mifid ii and how it will affect investment. New brochure on investor protection rules mifid ii fsma. Under mifid i, further detailed provisions are set out at. Since 3 january 2018, financial firms providing investment services are required to comply with mifid. Sep 21, 2017 the following mifid ii faqs will attempt to clarify some of the key issues surrounding investor protection and conduct of business. Mifid iimifir2 is an eu regulatory framework consisting of a.
Esma final report guidelines on mifid ii product governance requirements 2. Do you agree with the list of information set out in draft rts to be provided to the competent authority of the home member state. It will mean that when a firm designs a new product or makes changes to an existing one, they must consider the investor for whom it is meant and that any risks connected with the product are adequate for those types of investor. An overview of mifid ii and how it will affect investment firms. The updated document provides new guidance on the following issues. This is a transcript of a paper presented by kirstene baillie at fieldfishers mifid ii seminar at riverbank house in london on 10 september 2014 and repeated in part at the regulatory master class hosted by deacons in pwcs offices in hong kong on 16 october 2014. Mifid ii and investor protection whats new for asset. Mifid ii contains significant changes to the framework set out in mifid i, including in relation to investor protection and the functioning of financial markets. Mifid applied in the uk from november 2007, and was revised by mifid ii, which took effect in january 2018, to improve the functioning of financial markets in light of the financial crisis and to strengthen investor protection. Introduction absurd yield forecasts 1, a dramatic decline in the volume of corporate bonds traded by retail investors 2. The information contained in this document has been prepared by the services of dg fisma and is intended only for discussion purposes at the egesc meeting.
Mifid ii investor protection client reporting deloitte. It imposes additional disclosure obligations on financial institutions, including those related to the risks posed by specific products and greater. Its aim is to improve the functioning of financial markets and strengthen investor protection. Sfts are therefore inside the scope of the mifid ii record keeping requirements. This paper provides a summary of the key aspects of mifid ii. Responding to this consultation and follow up to the consultation. January 2018updated november 2019 this document is divided into three sections and is designed to explain wpics research status under mifid ii to allow compliance departments to approve it as a minor nonmonetary benefit. Investor protection under mifid ii 20 june 2014 this special report provides a brief overview of the key proposals relating to investor protection, set out in the recently published consultation paper 1 and discussion paper 2 containing draft technical advice measures and proposed draft regulatory technical standards. Mifid ii extended the mifid requirements in a number of areas including.