The sequel is never as good as the originalNov 6th, 2017
MiFID II is set to be implemented on 3rd January 2018.
What is it and what does it mean for investors?
In short, it means very little immediately, but there might be certain, albeit relatively minor, issues to deal with in time.
The Markets in Financial Instruments Directive (MiFID) is the framework of EU legislation concerning services provided to investment clients and the trading of financial instruments (e.g. stocks, shares, unit trusts etc.)
MiFID came into force in the UK in November 2007, but it is now being revised in an attempt to improve the functioning and stability of financial markets, as a response to the financial crisis in 2008.
The revised legislation will carry the rather original and snappy title of MiFID II.
The vast majority of the changes will not affect investment clients directly, as most are targeted towards financial institutions and intermediaries, with the aim being to bolster investor protection and strengthen confidence in the financial sector.
However, depending on the types of assets held by an investor, a financial institution might now need to request an “Individual Identifier”, so as to be able to fulfil its reporting obligations to the Financial Conduct Authority (FCA) under this revised legislation.This simply means that information concerning an investor’s nationality and/or domicile status may be requested.
So far, this is not a requirement for investors holding unit-linked collective investments (those held by many of PFP’s clients), though it may well be extended to include these in the future.It will, however, be an immediate requirement come 3rd January 2018 for investors holding individual equities, investment trusts and ETFs.
Where trusts are concerned, a “Legal Entity Identifier” (LEI) may instead be required if certain types of asset are held or traded.
An LEI is a 20-character alphanumeric reference code, issued by the London Stock Exchange (LSE), that is unique to each trust.The LSE will levy an initial charge of £115+vat, and an annual maintenance charge of £70+vat, for providing the LEI.
Importantly though, bare trusts are excluded from this requirement and are instead treated as individual clients.
So, in summary, MiFID will be implemented with the vast majority of clients knowing very little about it.There may, however, be some minor administrative ramifications down the line.