FCA consults on conduct issues under revised MiFID II

The Financial Conduct Authority (FCA) has published a third consultation paper on  implementation of the revised EU Markets in Financial Instruments Directive (MiFID II) with proposals on conduct, inducement, adviser charging and disclosure of costs


MiFID II is set to come into effect on 3 January 2018 and is a  package  of  EU  legislation  which  regulates  both  retail  and  wholesale investment business. meant to improve the rules governing the way capital markets function, contribute to the reform of derivatives markets and strengthen transparency of trading.

The third consultation will focus on the introduction of greater investor protection for retail and wholesale investment business, focusing on conduct of business issues to increase protections for retail investors. For example, the requirement for a written basic agreement will apply to professional clients  for  MiFID  business from 2018 while the FCA is proposing that discretionary investment managers be fully subject to the requirement to record telephone conversations, and the taping requirement applies to corporate finance business.

Implementation  of  MiFID  II  also  involves  changes  to  UK  legislation  and  changes  to  the  rules  of the Prudential Regulation Authority (PRA).

The FCA has  stressed that after the EU referendum result ‘firms must continue to abide by their obligations under UK law including those derived from EU law. They must continue with implementation plans for legislation that is still to come into effect, of which MiFID II is one such example’. 

The proposals include:

  • implementing requirements of full disclosure of costs and charges;
  • guidance on the responsibilities of providers for the fair treatment of customers.
  • extending the requirement of telephone taping to financial advisers, with the aim of providing benefits to both firms and their clients in resolving disputes in a quick and cost effective manner. The FCA has suggested that it is open to receiving and exploring suggestions on alternative proposals for smaller financial advisers; and
  • strengthening inducement and research rules to drive better competition and ensure research is only produced and consumed where it adds value to investment decisions.

The third consultation is open until 4 January 2017, except for comments on Chapter 16 - Supervision manual, authorisation and approved persons, which should reach the FCA by 31 October 2016.

The FCA CP16/29: Markets in Financial Instruments Directive II implementation – Consultation Paper III is available here

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