The EU's Markets in Financial Instruments Directive (MiFID) established a pan European framework for the provision of investment services and the operation of markets. It has been in force since November 2007. However, recent events and market developments have demonstrated weaknesses in some of the underlying principles of MiFID, exposing gaps in the regulatory framework, and highlighting areas which need reinforcement or revision. MiFID2 and MiFIR are aimed at closing these gaps in order to bolster investor confidence and achieve all of MiFID’s original objectives.
MiFID2 (recast MiFID) amends existing provisions on authorisation, conduct of business and organisational requirements for providers of investment services. In particular, MiFID2 introduces new requirements on product governance, independent investment advice and cross-selling and the extends existing rules to structured deposits as well as bolstering conduct of business requirements such as management responsibility, inducements, information reporting and remuneration. In addition to establishing specific organisational requirements for different trading venues MiFID2 introduces a new type of trading venue.
MiFIR sets out requirements on the disclosure of data on trading activity to public and transaction data to regulators, the mandatory trading of derivatives on organised venues and product intervention powers for regulators. As a directive, MiFID2 will need to be implemented into national law by EU Member States before it can take effect. As a regulation, MiFIR will have direct effect without any need for local implementation.
Under the original proposal, Member States were required to adopt and publish measures transposing MiFID2 and delegated acts into national law by 03 July 2016. MiFID2 and delegated acts under MiFID2 would apply from 03 January 2017. However, a one-year wholesale delay to the implementation of the MiFID2 is currently being approved. The key reasons for the delay are: (i) lack of IT Infrastructure within ESMA and the National Competent Authorities; and (ii) lack of finalised Level 2 technical standards and delegated acts. Accordingly, Member States will be required to adopt and publish measures transposing MiFID2 and delegated acts into national law by 03 July 2017 and MIFID2 will apply from 03 January 2018.
Simmons & Simmons will be holding a call series on MiFID2 in due course. If you would like to be invited to these sessions then please contact a member of our international MiFID2 team or your usual Simmons & Simmons contact. Details of these sessions can be found on our events calendar.
For more information please see our MiFID2 Tracker or contact a member of our international MiFID2 team.