FCA makes key MiFID 2 rules

On the deadline of 3 July, FCA has made its final rules implementing many aspects of MiFID 2. Its second feedback statement includes its response to consultation on amendments to

  • PERG
  • CASS
  • complaints handling
  • inducements, including adviser charging and inducements relating to research
  • client categorisation
  • disclosure requirements
  • independence
  • suitability
  • appropriateness
  • dealing and managing
  • underwriting and placing
  • investment research
  • client agreements
  • product governance
  • knowledge and competence
  • taping
  • COBS 18 regimes
  • SME growth markets
  • SUP
  • structured deposits
  • GEN
  • DEPP
  • consequential changes

It also annexes the made rulebook text in 4 instruments:

  • Fees (Data Reporting Applications) Instrument 2017
  • Glossary (MiFID 2) Instrument 2017
  • Markets and Organisational Requirements (MiFID 2) Instrument 2017
  • Conduct, Perimeter Guidance and Miscellaneous Provisions (MiFID 2) Instrument 2017

It has made some changes from the consultation version and comments on these, together with the key controversial elements from consultation, notably:

  • that collective investment undertakings other than UCITS are neither automatically complex or non-complex for the purpose of appropriateness rules;
  • it will not apply the taping requirements to all corporate finance business, but will remove the partial exemption for discretionary investment managers. It also notes that where Article 3 firms decide to take a note rather than record a telephone conversation it expects the note to include key details of any order taken and the key substance of main conversation points
  • it is setting lower thresholds for use when opting up local authorities to professional client status;
  • it will apply inducement rules on research to collective portfolio managers as well as MiFID 2 firms but will not go beyond MiFID 2 in any other respect
  • it will not apply the changes in the best execution rules to AIFMs

FCA warns that it will take it some time to incorporate all the changes into its rules, which presumably means it will be some time before it can provide the functionality to time travel its Handbook to see how a given Sourcebook will look as at 3 January 2018.

Alongside the new rules, FCA is consulting on a small number of changes it has not previously been able to consult on, mainly relating to trading, commodities firms and DRSPs. It needs comments on these proposals by 7 September.