MiFID
MiFID is the acronym for the Markets in Financial Instruments Directive and is the EU's latest action to create a single market and regulatory regime for investment services across all of its member states. It is a part of the wider EU Financial Services Action Plan, which has three wide objectives:
- A single EU wholesale market
- Open and secure retail markets
- State-of-the-art prudential rules and supervision
In particular, MiFID is intended to allow "passporting" of investment services between states. So that, in theory, there should be no barriers, a common set of regulations and a level playing field for (say) a Greek wealth manager hoping to sell his services to investors in the UK. Included in the Directive are specific prohibitions on that tendency of our civil servants, to "gold-plate" the original EU legislation (by introducing additional conditions) before introducing it to the UK.
The UK adopted the MiFID provisions on 1st November 2007. However, in common with much EU-bred legislation, the details have been emerging only slowly, making planning for the changes a difficult task for much of the Financial Services Industry. Moreover, it seems likely that many of our EU partners will not actually make the deadline.
How will MiFID affect clients?
You will be reassured to know that Rensburg Sheppards has, for many years, held to the 3 aims of MiFID and we are broadly very positive about its requirements. There will, therefore, be no major changes to the way in which we operate, or the standard of service, which you should continue to expect from us. From your point-of-view there are four key areas to the changes:
- Client Management. Covering how we establish what services and products you need and want from us and what is suitable for you. Also how we keep that information up-to-date and ensure that you agree with our assessment.
- Reporting. There are new requirements for how we report transactions to you, the performance benchmarks we agree with you and how we report to you on our progress against them.
- Best Execution. There will be particular requirements for us to be able to prove to you that we have dealt in the best market and at the best terms for you
- Rensburg Sheppards' Systems & Controls. Covering how we manage any conflicts of interest, how we run the Company and how we deal with our procedures, use of technology and outsourcing
What are we doing about it?
We are required to issue all of our clients with the changes to our Terms & Conditions of Business: we have written to you, enclosing the new documentation and explaining the changes to you. We also need to verify the financial information which we hold on you. In some cases the bulk of what we know about you, our clients, is in your investment managers' records: this wealth of knowledge is the product of relationships built-up over many years. In other cases you may have given us only, what you considered to be a sufficient amount of information to enable us to do our job. MiFID no longer allows us to act on your behalf or advise you, unless we have sufficient information on your circumstances to allow us to assess that our services and our advice to you are suitable. Accordingly, your investment manager will be contacting you to check that the information he holds is up-to-date and to take the opportunity to fill in any blanks.
There are other positive aspects to MiFID: we believe that this exercise to improve the information, which we hold about you and your affairs, will help us to develop more useful services and products for you. Furthermore, we will be allowed to report to you solely in electronic form, if you so wish and this is a capability which we intend to explore.
Should you have any questions or comments, prompted by this article, or any thing else you may have read about MiFID, please contact your investment manager.