As the deadline of the MiFID II implementation approaches, the FCA continues on apace, publishing both its fifth consultation paper and its first policy statement on MiFID II implementation. We are thus entering into a transitional period, away from consulting on the new rules towards finalisation and implementation.
Consultation paper 17/8
Consultation paper 17/8 deals with many of the consequential amendments to the FCA Handbook, in particular as a result of the third consultation paper, as well as the following topics on particular:
- Specialist regimes – Occupational Pension Scheme (OPS) firms will continue to be generally exempt from MiFID II requirements, however the FCA are proposing to apply MiFID II standards relating to inducements (and, as part of this, research), best execution and taping to OPS firms.
- Decision Procedure and Penalties Manual (DEPP) and Enforcement Guide (EG) – the FCA is proposing to change DEPP and EG to reflect various aspects of MiFID II including extending the FCA’s enforcement powers to cover persons subject to UK implementing legislation. These proposals will be subject to a six week consultation period.
Respondents to this consultation paper 17/8 have until 23 June to comment on the OPS provisions, and otherwise until 12 May.
Policy statement 17/5
Policy statement 17/5 predominantly covers markets issues, systems and controls, client assets and commodity position limits and recording of telephone conversations. The FCA broadly confirms its previous positions, noting that it is limited in its discretion by the need to comply with European Union obligations. However, the FCA flags the following as being particularly noteworthy developments:
- Post-trade transparency deferrals – FCA will allow trading venues to use the maximum permitted post-trade deferrals.
- Transaction reporting and collective portfolio managers and pension funds – the FCA will remove the current requirement for collective portfolio managers and pension funds to transaction report.
- Transaction reporting and third parties – the FCA confirms that investment firms providing transaction reports directly can use third parties to assist them but must submit the reports to the FCA themselves.
- Handbook guides – the FCA will publish Handbook guides to the implementation of MiFID II to help show how MiFID II has been implemented in the UK. These tables will take the status of the guides as guidance, and in due course will provide a link to the eventual UK MiFID II transposition table.
- Taping – as well as implementation of the specific MiFID II requirements the FCA will require that Retail Financial Advisers under the Article 3 exemption either to tape all relevant conversations or to keep a contemporaneous note of all relevant conversations.
- Asset management market study – the remedies identified in this study will be finalised in a way which is consistent with, and builds upon, MiFID II.
The FCA will publish a second policy statement at the end of June, and expects firms to be in a position to achieve compliance with the MiFID II requirements when they come into force in January 2018.
The general move towards publishing policy statements shows much of the preliminary discussion regarding the implementation of MiFID II is now complete, and so firms should now start focussing on implementation. Many of our clients are now well underway with their MiFID II implementation products.