Regulation  

Regulators given greater power by Mifid II

If the proposals of the revised Markets in Financial Instruments Directive consultation are given the go-ahead, regulators across Europe will have the power to prohibit or restrict the marketing and distribution of certain financial instruments.

The European Securities and Markets Authority launched a consultation and discussion paper yesterday (22 May) of the revised Mifid, demanding responses by 1 August.

The papers look at increasing pre and post-trade transparency for shares, exchange traded funds, certificates, bonds and derivatives.

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Many of the investor protection proposals put forward by the paper mirror those already introduced in the UK by the Retail Distribution Review.

The main proposals relating to the improved protection of retail investors are new limitations on the receipt of commissions and that independent advice should clearly be distinguished from non-independent advice.

Requirements would also be brought in across the continent on the manufacture and distribution of financial products including target market and risk identification.

Steven Maijoor, chairman of Esma, said: “The launch of today’s Mifid II consultation process is an important step in the biggest overhaul of financial markets regulation in the EU for a decade.

“The reform of Mifid is an integral part of the EU’s strategy to address the effects of the financial crisis and aims to bring greater transparency to markets and to strengthen investor protection. These changes are key to restoring trust in our financial markets.

“We appreciate the magnitude of this exercise for stakeholders. We strongly encourage all those affected by these reforms to provide their views to ensure that we take them into account in our final proposals.”

Daniel Godfrey, chief executive of the Investment Management Association, said: “The IMA supports consistent and meaningful disclosure of costs and charges across all products, all forms of distribution and all forms of investment services. Mifid II plays a key role in delivering that.

“The IMA has already implemented a programme to improve transparency for funds, the latest stage of which is the delivery of a comprehensive all-inclusive pounds and pence measure of costs per unit.”