On January 26, the Financial Services Authority (FSA) issued its final rules for the implementation of the EU Markets in Financial Instruments Directive (MiFID).
MiFID is the single largest change in European financial services legislation since 1995 and will replace and expand the EU Investment Services Directive (ISD). MiFID’s aim is to allow financial services institutions in the EU to provide their services across EU borders and establish EU branches. It is a core part of the EU's Financial Services Action Plan aimed at stimulating the adoption of common standards and promoting cross-border “passporting" of financial services throughout the EU. MiFID involves significant changes which will affect the organization and conduct of business of investment firms (key changes relate to best execution, conflicts of interest, client classifications and senior management responsibilities); operation of regulated markets; new pre-and post-trade transparency requirements for equity markets; the creation of a new regime for “systematic internalizers” of retail order-flow and more extensive transaction reporting requirements.
The UK met the EU’s January 31 “transposition” deadline for MiFID. The EU intended that all member states would have their rules in place to allow a nine month period for financial institutions to complete their plans for implementation of the new MiFID requirements ahead of November 1 when the provisions come into force. The only other EU member states to meet the deadline were Bulgaria and Rumania each of which only became EU members on January 1, 2007. It is not yet clear when the remainder of the EU and in particular the other jurisdictions with developed financial services industries will enact their transposition rules.