The financial services market is adapting to both the aftermath of the financial crisis and the transition to the new regulatory structure of the PRA and the FCA. Financial services firms are facing a raft of new regulation, as well as an increased focus on cost control and risk management. One of the most important tools that firms can use is training to develop awareness and understanding of the regulatory changes that are affecting them.
Obviously reform such as European Market Infrastructure Regulation, Markets in Financial Instruments Directive and Regulation II or the Alternative Investment Fund Managers Directive can be covered by external course providers or by professional advisers such as lawyers. However there are occasions when the financial services firm itself decides to institute its own internal training programme.
MiFID II comprises two pieces of proposed legislation. The recast Markets in Financial Instruments Directive and the Markets in Financial Instruments Regulation. Both are currently undergoing political negotiation in the European Parliament, the Council of the European Union and the European Commission. These negotiations are expected to be concluded by the end of the year with the European Parliament’s procedure files indicating that the plenary vote is expected to take place on 10 December. As MiFID II gets closer to being finalised how would a firm design its own internal training programme on this topic?
The following may help:
• Analyse the training needs within your firm. It is important to conduct an initial scoping exercise of MiFID II and understand what parts of it affects your business and what parts can possibly be ignored.
• Take a look at what knowledge your personnel will need to have of the applicable parts of MiFID II on completing the training programme. What knowledge do they have now and how can you bridge the gap?
• Think about scheduling. It is important to understand that people have a day job to do and use common sense to assess when training can be best fitted into the normal working day.
• Assess the most effective way your personnel can learn and consider the tools and resources that are available. The delivery of information and overviews of the MiFID II requirements can be carried out in large groups. But for more specialist topics – for instance the new safeguards on algorithmic trading and high-frequency trading – smaller groups may be better. Also remember that MiFID II introduces new rules on corporate governance and managers’ responsibility and consider how your board will be briefed on these.
• Think about the design of the training programme. Identify learning objectives which should be described in a manner that can measure what your personnel should be able to do once the training has been completed.
• Pay particular attention to how the training should be delivered, such as using a classroom approach. There should be a strong practical dimension, perhaps covering common regulatory issues and raising the question about what would be different when such issues occur in the MiFID II regime. It is worth noting that MiFID II introduces enhanced conduct of business requirements including those for advisers who wish to call themselves ‘independent’ and limits the circumstances when firms may provide execution-only services.
Conduct an initial scoping exercise of Mifid and understand what parts of it affect your business and what parts can possibly be ignored• Evaluate – determine if your personnel has obtained the required knowledge of MiFID II.
Some in the market believe that the earliest anticipated implementation date of MiFID II will be mid-2014 to January 2015. Others believe that it may be longer. However it is important that firms start to consider and train their personnel on how MiFID II will affect their business, not least because it will give them a better understanding of the detailed draft level II measures when they become available.
Simon Lovegrove is a lawyer with the financial services team of Norton Rose Fulbright LLP
