Introduction

Draft Perimeter Guidance relating to MiFID scope issues was published in two FSA Consultation Papers. In Consultation Paper 06/9, Organisational systems and controls - Common platform for firms (CP06/9) the FSA published draft Perimeter Guidance (PERG 13) relating to MiFID and the re-cast Capital Adequacy Directive (re-cast CAD). The purpose of this guidance was to help firms in their analysis of whether they fell within the scope of these Directives. Additional Perimeter Guidance was published in Consultation Paper 06/14, Implementing MiFID for Firms and Markets (CP06/14). The purpose of this guidance was to look at the effect of MiFID on the domestic scope of regulation.

Final Perimeter Guidance

The FSA has now published Policy Statement 07/5, Perimeter Guidance relating to MiFID (PS07/5). In this Policy Statement the FSA responds to comments on the draft Perimeter Guidance that was set out in CP06/9 and CP06/14. The FSA’s final Perimeter Guidance is contained in Appendix I of PS07/5 and will take effect from 1 November 2007.

Changes from the draft Perimeter Guidance

Some of the changes that have been incorporated into the final Perimeter Guidance include:

  • The FSA has stated that after further consideration it is of the view that where the relevant conditions are met it is possible for credit institutions to rely on the exemptions in Article 2 MiFID (see Q9).
  • Guidance has been included on when a credit institution may be providing “ancillary services” which are subject to MiFID requirements (see Q5).
  • Revised guidance on authorised professional firms (APF) so that it specifically refers to the standard requirement which appears on most APF permissions. The FSA has assumed that a firm which complies with this requirement will be exempt from MiFID and the re-cast CAD. The guidance indicates that the criteria set out in PROF 2.1.14G in relation to section 327 Financial Services and Markets Act 2000 (FSMA 2000) is also relevant to considering whether a firm can rely on the MiFID exemption (see Q39).
  • Revised guidance which states that the FSA associates the placing of financial instruments with situations where a company or business vehicle wishes to raise capital for commercial purposes and in particular primary market activity (see Q22).
  • Guidance to the effect that where a firm distributes units in a UCITS fund to investors, it does not, in the FSA’s view amount to placing (see Q22).
  • Revised guidance in Annex 2 so that for the purposes of MiFID the FSA does not think that a firm which performs the Article 25(2) FSMA 2000 (Regulated Activities) Order 2001 (RAO) activity of making arrangements with a view to transactions in investments would be receiving and transmitting orders. The FSA reports that alternative trading system operators who currently fall within Article 25(2) RAO will carry on the new activity of operating a multilateral trading facility from 1 November 2007.
  • Revised guidance on transferable securities with the inclusion of examples of instruments which the FSA does not consider to be transferable securities (see Q28).
  • Revised guidance on the Article 2.1(i) MiFID exemption to take into account issues raised by respondents on what is meant by “main business” (see Q44).
  • Revised guidance on the impact of the re-cast CAD on UCITS management companies (see Q63).
  • Revised guidance indicating the FSA’s view that MiFID does not alter the regulatory perimeter in relation to spot or forward foreign exchange contracts (see Q30).

Practical guide for firms on variations of permission

The FSA also stated in PS07/5 that it will publish a practical guide for firms. This guide will be designed to help firms when making the decision as to whether or not they need to apply for variations of permission or make passporting notifications as a result of the changes in scope arising out of MiFID implementation.