Latest UK proposals for future MiFID II regime covers conduct matters

UK’s latest revised MiFID II consultation address conduct-of-business proposals

At the end of September the UK conduct regulator (FCA) issued its latest conduct-of-business proposals for the new Markets in Financial Instruments Directive (MiFID II) regime due to be implemented from January 2018. This is the third element of consultation with the first issued back in December 2015 (CP15/43) covering various market infrastructure matters, and the second in July 2016 (CP16/19) covering related systems and controls issues as well as arrangements for specific trading instruments e.g. commodity derivatives, and extending its potential relevance to unregulated trading entities.

This latest consultation covers a range of specific conduct-of-business issues, including a number of governance and operational matters which will be of some consequence and application to investment firms and advisers of all sizes, such as product governance, as well as rules concerning investment research, inducements but also extended requirements to financial advisers in regard to telephone-call recording.

Overall, the revised MiFID II regime is expected to enhance and strengthen standards of fairness and transparency for consumers, offering protections which albeit directed in particular towards retail investment will equally have some resonance and impact across wholesale investment business too. The detail and scope of the revised MiFID II regime will be of direct relevance to many types of businesses from banks, to investment and asset managers, to financial advisers, who should ensure they maintain suitable and effective internal resource and priority focussed on this aspect of major regulatory change.

The FCA expects to issues its final policy approach and requirements around the matters covered within this latest (third) MiFID II consultation later during H1 of 2016, though it also intends to issue a further forth consultation (No. IV) before the end of 2016.