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MiFID II Compliance Healthcheck Service

Background

The EU directive MiFID II (The Markets in Financial Instruments Directive) became effective January 2018. This Directive has been issued alongside its accompanying regulation MiFIR (The Markets in Financial Instruments Regulation).

The Impact on Our Clients

MiFID II (including MiFIR) requirements have impacted a number of key operational areas for the typical asset manager. These requirements include:

  • Increased scope and level of transaction reporting to Nationally Competent Authorities (NCAs) across a much wider range of financial instruments, and to a greater level of granularity around decision makers and traders
  • Transparency to clients over costs and charges
  • Being clear, fair, and not misleading, particularly around issues that include risk, client reporting, and financial promotions.
  • Suitability and appropriateness with respect to clients' ability to bear risk
  • Ensuring best execution and publication of the quality of best execution
  • Additional maintenance requirements for appropriate telephone and e-communications records
  • Unbundling of research and execution commissions
  • Obligations around increased governance in respect of corporate policies including remunerations, conflicts of interest, and product governance.

Taking into consideration everything within the scope of MiFID II, this particular regulation has been one of the biggest to ever hit the industry and has led to regulators having enhanced visibility into market activity.

Why Perform a Health Check?

Now that many, if not all, MiFID II work streams have been handed over to BAU, it is prudent to take a step back and review the final implementation. Guidance continues to be refined, and regulators are set to conduct assessments of the market impact, along with individual firms' compliance with the directive. This continued focus from regulators makes complacency particularly unadvisable and an ISC Healthcheck will ensure readiness for regulatory reviews.

How can ISC Assist?

ISC have been involved with major institutions in delivering all components of MiFID II (and its predecessor). The ISC team has experience of all functions within an asset manager as well as knowledge of how the exchanges, brokers, banks and other participants in the financial services industry operate.

Review Process

The review process provides firms a benchmark against industry best practice to ensure continued compliance, with recommendations of areas to improve. Tactical solutions are assessed on their ability to meet the regulatory requirements and on the ongoing risk they present to the firm. The output provides a report giving firms the evidence, if challenged by the regulators, that they have considered their approach after undertaking a thorough and independent review. As well as looking for consistency, the report will provide recommendations for possible time and costs savings.

MiFID Objectives