In reality, chances are you’re going to get caught up in MiFID II.
Its scope means any buy-side firm that has dealings with European clients, funds or even assets will be subject to at least some aspects of the rules. And that includes non-EU organizations. Indeed, around two-thirds of US firms are expected to be impacted.
MiFID on steroids
While MiFID II is based on the same principles of investor protection, competition, fairness and transparency as the original MiFID directive, it goes much further.
For one, the rules extend beyond equities. Instead, they will now stretch across the OTC markets to include bonds and almost all derivatives that impact asset managers.
The business conduct requirements will also be far more onerous, with a particular emphasis on:
- Market fairness and transparency – including ensuring costs and fees are fair and transparent.
- Best execution and investor protection – with new requirements to unbundle research and execution commissions, and provide greater pre- and post-execution transparency.
- Disclosure and reporting – which will see asset managers facing greater reporting responsibilities, with increased communication, disclosure, and transaction and post-trade reporting obligations.
- Suitability and appropriateness – where firms will face strict demands to ensure their products and services are sold to the appropriate client base, and are well-suited to their needs, aims and characteristics.
From our in-depth studies of the regulations, we know the changes promise to be complex and wide-ranging. And to complicate matters, institutions will be expected to comply not just withthe letter of the rules, but as far as possible with the spirit of the regulations. That poses a huge challenge for investment managers.
Share the burden
As an organization, it will be up to you to interpret the specific rules and wider principles concerning how you deal with clients, then change your operations in response.
That’s no easy task – especially given how little time is left. And there is no one-size-fits-all route to compliance. Firms will need to adopt different solutions and approaches, depending on their size, complexity, client base and operating models.
But help is available.
Specialist consultants with deep understanding of the rules and their implications can pinpoint how you should adapt your processes and technology to cope. And technology providers, like SS&C Advent, continue to enrich their platforms and roll out new functionality to ease the operational burden wherever possible.
Just make sure you don’t leave it too late.