Thu. Nov 14th, 2019

Planet Compliance

Innovation & Regulation in Finance

European Watchdog provides last minute clarifications on MiFID II

4 min read

With two weeks until the launch date of one of the biggest regulatory initiatives in history, the European Securities and Markets Authority (ESMA) has provided some clarity in respect of several aspects of MiFID II / MiFIR by publishing various documents.

Investor Protection Q&As

In an update to its Questions and Answers (Q&A) document on the implementation of investor protection topics under the Market in Financial Instruments Directive and Regulation (MiFID II/ MiFIR), ESMA has added 10 new Q&As. They cover the topics of inducements, suitability, and provision of investment services and activities by third country firms.

  • The overall MiFID II Q&A provide clarifications on the following topics:
  • Best execution;
  • Suitability and appropriateness;
  • Recording of telephone conversations and electronic communications;
  • Post-sale reporting;
  • Record keeping;
  • Investment advice on an independent basis;
  • Inducements (research);
  • Information on charges and costs;
  • Underwriting and placement of a financial instrument;
  • Client categorisation;
  • Inducements;
  • Provision of investment services and activities by third country firms; and
  • Application of MiFID II after 3 January 2018, including issues of late transposition.

ESMA highlighted that it will continue to develop this Q&A on investor protection topics under MiFID II in the coming months, both adding questions and answers to the topics already covered and introducing new sections for other MiFID II investor protection areas not yet addressed in this Q&A.

Data Reporting Q&As

Furthermore, ESMA updated Q&As regarding data reporting under MiFID II) and MiFIR.

This document includes updated Q&As on:

  • Unknown date of admission
  • Concept of underlying
  • Non-EU branches of EU Investment firms

The purpose of this document is to promote common supervisory approaches and practices in the application of MiFID II and MiFIR in relation to regulatory data reporting topics. It provides responses to questions posed by the general public and market participants in relation to the practical application of data reporting requirements.

Transparency and Market Structure Q&As

ESMA also updated its Q&As regarding transparency and market structures issues under the Market in Financial Instruments Directive (MiFID II) and Regulation (MiFIR). They provide responses to questions posed by the general public and market participants in relation to the practical application of transparency requirements. This update includes new answers regarding:

  • The scope of the tick size regime;
  • Application of MiFID II after 3 January 2018, including issues of ‘late transposition’;
  • Equity transparency;
  • Non-equity transparency; and
  • Pre-trade transparency waivers.

Guidance on cross-border provision of investment services in the transition between MiFID I and MiFID II

In its guidance to national competent authorities (NCAs) and market participants, ESMA advised on the topic of continuity of cross-border provision of investment services in the transition between MiFID I and MiFID II, including in the event that there is late transposition of the Directive by some Member States. In this context, ESMA also issued guidance on the cross-border operation of regulated markets and the provision of data reporting service providers (DRSPs). The new Q&As cover both secondary markets and investor protection related issues including the validity of authorisations; continuity of the provision of services by regulated market; and provision of data reporting services with regard to secondary markets. In respect of Investor Protection, the document addresses the validity of authorisations; existing passport notifications validity; the continuity of the provision of investment services; and new passport notifications. ESMA stated that the Q&As have been developed in order to provide  practical solutions to the problem of late transposition in the EU, taking into account to the extent possible the need to preserve business continuity after 3 January 2018, as it is key to facilitating cross-border business and services in the EU, one of the main drivers of MiFID II.

 

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