Survey Highlights Alarming Lack Of Awareness Of MiFID At Board Level

by Robert Lee, for LawAndTax-News.com, London

24 April 2006

Nearly half of board members and senior managers in financial services organizations lack awareness of the implications of the EU's Markets in Financial Instruments Directive (MiFID), according to a study by KPMG, the accounting firm.

KPMG says that the report, written in co-operation with the Economist Intelligence Unit, and entitled 'Capturing value from MiFID', indicates how few boards have fully appreciated the impact this wide reaching Directive is likely to have on their businesses when fully implemented in November 2007.

Based on a survey of 199 financial services companies across Europe, the report found that only 29 percent of companies have even assigned a project manager to oversee the implementation of MiFID and only 17 percent have allocated a budget to prepare for MiFID.

More than two-thirds (35 percent) of respondents thought senior management’s lack of awareness was one of the biggest threats to their business being ready for MiFID.

Less than 50 percent of respondents said their organization had even reviewed the Directive.

“For organizations to gain the full benefits of MiFID it is imperative that they treat it as a business issue: it is not just about internal compliance," observed Jonathan Jesty, Financial Services Partner, KPMG LLP (UK).

"Unlike much regulation that has gone before, it is likely to have a significant impact on the wider financial services market place," he added.

MiFID is expected to have the greatest impact of all financial services legislation introduced in the last five years and is one of the cornerstones of the EU's Financial Services Action Plan, which seeks to create a single market for financial services in Europe.

The objective of the MiFID is to enable investors to invest and procure investment services across EU borders more easily, to remove obstacles to the use of the EU passport by investment firms, to foster competition and a level playing field between Europe’s trading venues, and to ensure appropriate levels of protection for investors and consumers of investment services across Europe.

KPMG's survey found that nearly 60 percent of respondents are optimistic that MiFID will deliver a greater choice of investment products, more competitive pricing (47 percent) and more accessible objective advice (45 percent) if implemented effectively.

Over two-thirds (37 percent) felt that the common regulatory standards introduced by MiFID should make it easier to do business across Europe.

However, the survey suggests it has been difficult for regulators to communicate with their constituencies effectively given the lengthy policy negotiations, major uncertainties and shifting deadlines on MiFID.

Jonathan Jesty continued:

“There seems to be a real concern within the industry that MiFID will not result in common rules that will be consistently applied across Europe. Only one in five respondents to the survey expects this consistency to occur."

“It is critical that firms, the industry and regulators strive to ensure they extract the maximum benefit from MiFID in terms of simpler, better European regulation in return for the significant investment that it requires."

KPMG concluded from the survey that investment banks and asset managers are likely to emerge as the winners.

“The likely winners from MiFID should be those who respond to it as a business issue, but in a thorough and proportionate manner," concluded Mr Jesty.

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