After months of preparation, MiFID II-day has finally arrived but never fear, we’ve put together five points every adviser should know about the all-encompassing regulation…

The implementation of regulation under the second Markets in Financial Instruments Directive (MiFID II) may not bring the calmest start to the New Year but like it or not the deadline is here.

Advisers have already said they expected complying with MiFID II to be the biggest challenge for their business in 2018, ahead of preparations for the General Data Protection Regulation (GDPR), to be rolled out in May.

While the Financial Conduct Authority (FCA) acknowledged the regulation presented a significant challenge for firms, it expected them to take “reasonable steps” to meet today’s deadline.

So to get your ‘New Year, New Regulation’ head in gear we’ve put together five need-to-know points for your MiFID II checklist…

Recording Requirements

The regulator may have U-turned on previous plans to require all relevant conversations involving financial advisers to be recorded but under the final rules, firms were instead also given the option to take written notes.

Should a firm choose to take written notes, the FCA has said it expects, as a minimum, the date and time of the meeting, its location, the identity of all attendees and who initiated it, relevant information about the order (price, volume, type of order and when it needs to be transmitted or executed) and the reasons for the order.

For those opting to take recordings, firms will be required to have suitable systems and technologies in place.

Both options also require firms to be securely stored for five years, linking in with incoming GDPR rules. Whichever route firms choose to go down, they will be expected to maintain a policy, overseen by senior management and ensure staff are fully trained under these requirements.

If a client’s portfolio falls by 10% or more, they will have to be notified within 24 hours under the new rules. Advisers have been urged to check whether the responsibility lies with the discretionary fund manager (DFM) or platform and how it will be reported.

Likewise, advisers will need to check if the DFM or platform will offer online reporting access to avoid the need for paper reporting.


In its final rules, the FCA stated the regulation would tighten the “acceptable hospitality manner” for advisers.

The regulator said hospitality is acceptable if it is “of a reasonable de minimis value, such as food and drink during a business meeting or a conference, seminar or other training events … [such as] … participation in conferences, seminars and other training events on the benefits and features of a specific financial instrument or an investment service.”

Restricted Vs. Independent

Advisers must now choose either to be independent or restricted, and can no longer switch between the two statuses. Firms will still be able to provide both types of service but individual advisers will not. The FCA said the rule is intended to avoid potential consumer confusion about the type of advice they are receiving.

Legal Entity Identifier

For advisers who manage investments within a client’s trust, they will now be required to have a Legal Entry Identifier (LEI). Shares, corporate bonds, structured products, exchange traded instruments and venture capital trusts, are some, but not all, of the financial instruments subject to the regulation.

LEIs, which have existed since 2012 but have not been compulsory, are 20-digit alpha-numeric codes used within a global data system. They ensure every legal entity or structure can be identified in any jurisdiction in any given financial transaction.

LEIs can be bought via the London Stock Exchange, charging on a cost recovery basis. There is also an allocation cost of £115 plus VAT and an annual maintenance cost of £70 plus VAT per LEI.

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Source: Professional Adviser



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