MiFID2 - Resources from Simmons & Simmons

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The Markets in Financial Instruments Directive (MiFID) is the framework of European Union legislation governing investment services which is now being comprehensively revised to improve the functioning of financial markets in light of the financial crisis and to strengthen investor protection. The new legislation will be known as MiFID2.

Financial institutions will need to start planning for the changes ahead of the EU implementing legislation to remain compliant. Simmons & Simmons has in depth experience advising on regulatory reform and the implementation of various European directives including MiFID. MiFID2 is a wide-ranging piece of legislation and, depending on business model, could affect a wide range of a financial institution’s functions, from client services to IT and HR systems. Our sector focused team therefore work closely with other specialists within the firm to offer our financial institutions clients a cohesive multidisciplinary service across a number of jurisdictions where our clients operate.

What is MiFID2?

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.

Preparing for MiFID2

Briefings & Training

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.