FSA Consults On Implementation Of MiFID

by Robin Pilgrim, LawAndTax-News.com, London

04 August 2006

The UK's Financial Services Authority on Monday published a consultation paper on implementing the Markets in Financial Instruments Directive (MiFID) for FSA-regulated firms and markets.

MiFID is designed to foster competition and a level-playing field between Europe’s trading venues for financial instruments, and to provide appropriate levels of protection for investors and consumers of investment services across Europe.

It sets the initial authorisation conditions and ongoing regulatory requirements for investment firms, Regulated Markets (RMs) and Multilateral Trading Facilities (MTFs). It introduces pre- and post-trade transparency requirements for equity markets, and sets more extensive transaction reporting requirements. It also expands the range of investment services and financial instruments that firms can offer under a 'passport' between EU states.

In drawing up its proposals, the FSA has followed the pragmatic and proportionate approach set out in its Better Regulation Action Plan and the Joint Implementation Plan for MiFID, published with the Treasury in May 2006.

Hector Sants, FSA Managing Director of Wholesale Business, announced that:

"This consultation paper is an important step towards introducing MiFID next year and follows extensive informal consultation with the industry on the key areas of change."

"We believe we have stuck to our commitment to minimise the burden on firms by adopting a proportionate approach to implementation."

The consultation paper is divided into three parts:

• Part I explains the proposed changes to FSA rules, guidance or procedures arising from the implementation of MiFID requirements relating to the scope of UK regulation; the authorisation of investment firms and their passporting rights; the registration of tied agents; and the enforcement powers and regulatory cooperation obligations of competent authorities;
• Part II sets out the FSA's proposals for implementing the MiFID requirements on client assets, together with the prudential requirements and capital adequacy data requirements for MiFID firms that are exempt from the Capital Adequacy Directive; and
• Part III explains how the FSA intends to implement MiFID’s provisions governing RMs and MTFs, where they are not already covered by proposed Treasury legislation. It also deals with pre- and post-trade transparency for transactions in shares admitted to trading on a RM and concluded either on RMs, MTFs or by investment firms trading outside an RM or an MTF, including those acting as systematic internalisers; and the MiFID provisions on transaction reporting.
  

Broadly speaking, the types of firm likely to fall within MiFID scope include: retail banks; investment banks; portfolio managers (excluding firms acting as managers of collective investment schemes); stockbrokers and broker-dealers; many futures and options firms; corporate finance firms;
wholesale market brokers; operators of RMs and MTFs; providers of custody services; and some commodities and venture capital firms.

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