What do you have planned for January 3rd 2018? It’s a little far out for most people to have a firm idea, but in the Financial Services world it’s the day that MiFID II takes effect, significantly changing the legislation around Financial Instruments. A report by IHS Markit and Expand released earlier this year estimated that preparing for MiFID II will cost the Financial Services industry more than two billion dollars, and require firms to work on the changes across much of 2017.
How exactly MiFID II will affect you will vary quite widely depending on your business, with potential ramifications for IT and HR as well as the more obvious changes to trading and transaction reporting.
A lot of people have reacted most strongly to article 24 which prohibits inducements for discretionary asset management and ‘independent’ advice, but there are other sections that I think are going to have just as big of an effect. Some of the changes everyone in the Financial Services space will want to be aware of include stricter rules relating to Senior Management – there are new requirements for corporate governance and executive/non-executive directors, a new need for a governing body within investment firms and data services providers, stronger criteria necessary for qualified senior management, with directors and supervisors needing to commit sufficient time to their governance functions and tighter controls on remuneration of staff advising or selling to clients which will make sure that bonus criteria don’t conflict with acting in the best interest of clients.
There will also be enhanced protection for investors, with advisory and portfolio management clients now being the subject of periodic performance reports including detailed suitability assessments and advice will have to meet new criteria in order to be ‘independent’ – including assessing a wide enough range of financial instruments, not limited to in-house products.
That’s just two of the many areas addressed and already, many firms would have to do a lot of work to meet these requirements – January 2018 suddenly doesn’t feel so far away.
How ready are you? Reports carried out this year suggest that across the UK different organisations are at wildly different levels of preparedness, with many having a long way to go. By now, plans should be drawn up – from there, firms need to assess if they have the skill sets and resources to make those plans a reality in time. If you realise you don’t, there’s still time to fix that with interim or permanent staff who have expertise and experience in the relevant areas. If you’re already considering a permanent addition to your compliance function, it’s crucial to make sure your choice is ready and able to transform your processes and policies in order to be in line with the MiFID II regulations, and you have the advantage that they’ll be in place from then on to ensure things continue to run smoothly once the necessary transformation takes place. On the other hand, they will also be having to fulfil all the other pre-existing requirements of their position.
For many organisation the ideal solution will be an interim professional who has previous experience of MiFID implementation, someone who can immediately get to work on the specific task of making your organisation MiFID II ready. With that distinct focus, an interim can lead the full process from planning through to the final BAU handover, and all at a reduced cost to the business.
If you’re not confident that your organsiation is going to be MiFID II compliant by the kick off date, whether you’re part way through the process or just setting out, Kind Consultancy can connect you to both permanent and interim governance, risk and compliance professionals with MiFID expertise.
Call us on 0121 643 2100 or e-mail firstname.lastname@example.org for a confidential discussion about your resource needs.