Trade associations have joined the regulator in welcoming the one-year stay of Mifid II execution, while also warning the industry still has a lot of work to do.
Yesterday (11 February), the European Commission confirmed it will delay the implementation of the directive across the European Union, stating this was to “take account of the exceptional technical implementation challenges faced by regulators and market participants”.
The extension means Mifid II will now apply from 3 January 2018.
The Markets in Financial Instruments Directive is the EU legislation regulating firms providing services to clients linked to ‘financial instruments’ (shares, bonds, units in collective investment schemes and derivatives), and the venues where those instruments are traded.
Jonathan Hill, commissioner for financial services, financial stability and capital markets union, said this will give people another year to make the necessary changes to their systems.
“Meanwhile, we are pressing ahead with the level II legislation to implement Mifid II and expect to announce those measures shortly,” he added.
The delay had been widely called for and expected towards the end of last year, but Association of Professional Financial Advisers’ director general Chris Hannant still said it was good to have more time to prepare properly.
He said: “However, given the continued absence of level two measures, the timetable is likely to still be challenging and we need to have certainty from the European Commission and FCA as soon as possible.”
A spokesperson for the Financial Conduct Authority responded it wants a successful implementation of the new rules and part of this means having a realistic implementation timetable for both regulators and firms.
“Despite the delay, firms need to continue to press ahead with their implementation work. There’s still a lot for them to do to be ready in time for the new implementation date.
Despite the delay, firms need to continue to press ahead with their implementation work. There’s still a lot for them to do to be ready. FCA“For our part, we will look to finalise the resulting changes to our Handbook as soon as practicable to provide firms with adequate time to complete their implementation work.”
In December, the regulator kicked off its two-part Mifid II consultation by focusing on areas in which it has “sufficient certainty”. Calling for responses by 8 March, it covered areas including the expansion of transparency requirements to equity-like and non-equity markets, transaction reporting, and algorithmic and high frequency trading requirements.
Last month, the FCA stated that its separate retail market consultation paper on Mifid II implementation will be published this April, a month later than first anticipated.
This will address issues of particular concern to the retail investment industry, such as the directive’s designation of complex products, new rules over costs and charges disclosure and definitions of restricted and independent advice.
Keith Richards, chief executive at the Personal Finance Society, commented that rule changes have to work well for consumers, so implementing change which could lead to significant disruption and cost for the industry, will ultimately impact on consumers, no matter how well intended.
“We will now have more time to work with the FCA to use the additional breathing space to better prepare and guide our membership accordingly,” he said, adding that he will be meeting with the regulator later this month to discuss what additional guidance for the advice profession is needed.
The Federation of European Independent Financial Advisers’ chief executive Paul Stanfield said that the delay provides further time for advisory firms in mainland Europe to adapt and develop their business models and strategies.
“It would be dangerous if such businesses saw it as an opportunity to slow the pace of the changes that most of them need to make; I feel that they should see it as a chance to more fully ensure that these developments are appropriate for the significantly different operating environment that will face them from 2018 onwards.”
He also pointed out that now both Mifid II and the Insurance Distribution Directive come into force in early 2018, the potential for regulatory arbitrage within the advisory sector is significantly reduced.
Ian Cornwall, director of regulation at the Wealth Management Association, said the main question continues to be whether the Regulatory Technical Standards and Delegated Acts can be approved in time, together with the subsequent publication of the supporting level three material, to give regulators and industry certainty to implement the rules before January 2018.
“There are many issues that WMA members wish to address as quickly as possible, not least because of the length of time needed to specify and build new systems; but at present they can take no action until the regulatory obligations are finalised.”
A spokesperson for the European Securities and Markets Authority stated: “The deadline extension provides Esma, the national authorities and the industry with necessary additional time to build complex, new systems which will implement Mifid II rules practically.
“Another important factor is for the level two measures, which underpin Mifid II, to be decided upon.”
peter.walker@ft.com
