Mifid II  

FCA authorisation rules tightened under Mifid II

FCA authorisation rules tightened under Mifid II

Individuals seeking authorisation under European-wide rules face stricter requirements before they are allowed to run an investment advice business.

Plans to tighten the authorisation requirements are part of a consultation published today (29 September) by the Financial Conduct Authority, which details new rules proposed under the Market in Financial Instruments Directive II.

According to the paper the proposals “will indirectly increase consumer protection by ensuring the information on the members of the management body, and on the persons who direct the business, we receive as part of a new investment firm authorisation application meets the standards set by Mifid II”.

Article continues after advert

Among the many changes planned is a section on what information advisers would need to include on a revamped ‘Form A’, used to apply to the FCA for authorisation.

The FCA has decided the current form, along with other information disclosure documents, leaves gaps in the data they provide.

Under the new rules, firms seeking authorisation under Mifid II will no longer be able to use a short version of the Form A for the appointment of members of the management body or persons who direct the business.

As a consequence, the new Form A for Mifid II firms will require details of the individual’s employment history for the past 10 years instead of five years.

It will also include a follow-up instruction requiring candidates who have disclosed a criminal offence to provide an official certificate of conviction where available.

Another question will ask whether the candidate or the firm are aware of any financial or non-financial interests of the candidate and/or close relatives to members of the management body and key function holders at the firm, its parent, its subsidiaries or shareholders.

Applicants will also be required to provide information on the minimum time that will be devoted to the performance of their function within the firm, and information on human and financial resources devoted to the induction and training of the candidate.

Documentation relating to the person’s reputation and experience will also be needed, in particular a list of reference persons including contact information, letters of recommendation and information on whether an assessment of reputation and experience as an acquirer or as a person who directs the business has already been conducted (including the date of the assessment, the identity of that authority and evidence of the outcome of this assessment).

The rules will apply to individuals who who have the regulatory designation CF1 director, CF2 non-executive director, CF2a chair of the nominations committee, CF3 chief executive, CF4 partner, CF29 significant management.

The FCA stated it aims to make a new Form A available with the new MiFID authorisation forms at the beginning of 2017.