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Home > Regulation > Regulation Tracker > MiFID


regulation keypoints

The Markets in Financial Instruments Directive (Mifid) placed more emphasis on home state regulation and required IFAs to categorise their clients and prove the advice they gave was appropriate.

The Markets in Financial Instruments Directive (Mifid) came into effect on 1 November 2007, and replaced the existing Investment Services Directive (ISD).

* Mifid aims to provide a harmonised regulatory regime for investment services across the 30 member states of the European economic area (the 27 Member States of the European Union plus Iceland, Norway and Liechtenstein). The main objectives of the Directive are to increase competition and consumer protection in investment services.

* Firms covered by Mifid will be authorised and regulated in their “home state” (broadly, the country in which they have their registered office). Once a firm has been authorised, it will be able to use the Mifid passport to provide services to customers in other EU member states. These services will be regulated by the member state in their home state.

* Mifid requires firms to categorise clients as “eligible counterparties”, professional clients or retail clients. The different categories have increasing levels of protection.

* The directive requires IFAs to have clear procedures in place to categorise clients and assess their suitability for each type of investment product.

* The appropriateness of any investment advice or suggested financial transaction must still be verified before being given.

* Mifid has requirements relating to the information that needs to be recorded when accepting client orders. The directive demands evidence a firm is acting in a client’s best interests and as to how orders from different clients may be aggregated.

* Operators of continuous order-matching systems must make aggregated order information on “liquid shares” available at the five best price levels on the buy and sell side.

* Firms are required to publish the price, volume and time of all trades in listed shares, even if executed outside of a regulated market, unless certain requirements are met to allow for deferred publication.

* IFAs must take all reasonable steps to obtain the best possible result in the execution of an order for a client in order to meet Mifid requirements. The best possible result is not limited to execution price but also includes cost, speed, likelihood of execution and likelihood of settlement and any other factors deemed relevant.

* A systematic internaliser is a firm that executes orders from its clients against its own book or against orders from other clients. Mifid treats systematic internalisers as mini-exchanges. The directive makes them subject to pre-trade and post-trade transparency requirements.

* The Financial Services Authority (FSA) incorporated Mifid into its handbook of rules and guidance.

To read more about Mifid click here.

  1. Published by FCA, 15 Jul 2013

    Handling client cash

    Plans to ensure clients can get their hands on their investment cash more quickly if a fund manager goes bust have been put forward by the FCA.

    Proposed: deadline for responses 11 Oct 2013.

  2. Published by EU, 05 Apr 2012

    Use of electronic trading platforms

    Regulators in Europe have set out rules for how to use electronic trading systems, which will come into force on 1 May.

    Final ruling: effective from 01 May 2012.

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