7th August 2017 | Mark Stubbles
MiFID II and what it means for your firm
MiFID (Markets in Financial Instruments Directive) has been in force across the European Union since 2008, the aim of the MiFID was to ensure that all EU members shared a common and robust regulatory framework that protected investors. MiFID gave regulatory responsibility for firms outside the EU to each member state, this meant some firms gained a competitive advantage. MiFID II looks to address these regulatory issues, on the 3rd January 2018 the new directive will come into force.
The FCA says, “MiFID II is a wide-ranging piece of legislation and, depending on your business model, could affect a wide range of your firm’s functions – from trading, transaction reporting and client services to IT and HR systems.”
If your firm is an interdealer broker, engages in algorithmic and high-frequency trading, is a data reporting service provider, an investment manager, a corporate finance firm or a venture capital firm it is too late to request a waiver. The FCA had to submit waiver applications to ESMA by the 31st July 2017.
The Biggest Change
The biggest change MiFID II will bring is to call recording, to comply with the MiFID II directive anyone who is involved in the advice chain for a trade will need to record and store all mobile communications for five years.
Larger firms will most likely have a compliance programme in place already, this will need to be reviewed and updated to ensure it is MiFID II compliant. Smaller firms may struggle with the new directive, they probably won't have a dedicated compliance officer and will probably find they have to implement call recording procedures for the first time.
General Data Protection Regulation (GDPR) is another EU regulatory change that comes into force next year. It is a good idea to look at what GDPR planning has already been done within your firm, you may find MiFID II and GDPR compliance can be combined.
From January any calls that might influence a trade will need to be recorded and stored, all businesses within the financial services industry will need to consider and understand how call records can be saved and how they will be accessed if they are required. It's not just voice communications that may be affected, firms may also need to consider the implications and challenges presented by apps like WhatsApp.
Talking to a company that specialises in unified communication and planning any new technology implementations with them means that your company can implement the latest technology and avoid potential issues before the new regulations take full effect.