MIFID II

The Markets in Financial Instruments Directive II (“MiFID II”) became effective on 3rd January 2018 and is generally considered one of the most important regulatory updates undertaken by the EU since the financial crisis.

Although MiFID II is not expected to impact pension trustees directly, it is expected that a range of new rules for investment firms and asset managers will affect contractual relationships and third parties. In very broad terms, MiFID II relates to the structures within which financial instruments are traded and sold, together with their trading platforms. For group pension trustees it will be important to obtain a legal entity identifier (LEI) number for the trust as this is a requirement for reporting of all trade executions under MiFID II.

MiFID II Conflict of Interest rules are also stricter and place a far greater emphasis on prevention of conflicts which have a risk of detriment to clients. It suggests that disclosure of such conflicts should be as a last resort, rather than a solution to the problem. Notable also is the requirement to specifically describe the conflict to the client and the steps taken by the firm to mitigate the risk and the risks to the client. As well as this, brokers and advisors must no longer describe themselves as “independent” if they accept fees or commissions from product providers or other third parties with the exception of a limited number of minor, non-monetary benefits which must also be clearly disclosed to clients. In respect of record keeping, all MiFID II regulated entities should note that the recording requirement for client instruction phone calls is significantly extended and that there is now a requirement that these records be kept for five years.

2018-09-13T12:05:57+00:00