28Jun

The Financial Conduct Authority (FCA) has highlighted that, in effect, there are only a few days left for affected firms to make applications for authorisation and/or variations of permission under the European Union’s Markets in Financial Instruments Directive II (MiFID II).

Although MiFID II does not come into force until January 3 2018, firms who need to vary their permissions as a result of the Directive have been asked to submit these applications by July 3 of this year. The FCA says that firms must meet the July deadline in order to ensure that their applications can be considered and approved by next January. Submitting by July 3 should also hopefully ensure that firms have time to provide additional information in support of their applications should the regulator require this.

In its press release on this subject, the regulator says:

“Most applications are not complete when they are submitted. Firms who have not already done so should therefore submit applications as a matter of urgency to help us identify as soon as possible what, if any, further information is needed to complete the application. We cannot guarantee that any application which is only complete after 3 July 2017 will be determined by 3 January 2018.”

The FCA adds that firms that continue to do business without the necessary permissions come January 2018 will be committing a criminal offence.

Firms that may need to make a variation of permission application as a result of MiFID II include investment firms seeking to extend their permissions in order to operate Multilateral Trading Facilities (MTFs) or Organised Trading Facilities (OTFs). Any individual or firm currently carrying out high frequency trading (HFT), and who is not currently authorised as an investment firm by the FCA, will need to be authorised as such under MiFID II.

MiFID II will introduce a requirement to disclose all product and other charges to investors upfront; a different definition of independent financial advice; an increased emphasis on assessing clients’ capacity for loss before giving investment advice; and new rules on the receipt of inducements. Its implications for advisory firms could be far reaching, and could have an impact in areas such as:

  • Resolution of conflicts of interest
  • Complaints resolution
  • Handling of client assets
  • Inducements and payments to third parties
  • Suitability of advice
  • Provision of information to clients

Earlier suggestions that the legislation would require all financial advisory firms to tape conversations with clients have now been dismissed – keeping a written record of the conversation will suffice instead.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.