Does your company or the company you work for offer financial advice linked to ‘financial instruments’ (shares, bonds, units in collective investment schemes and derivatives), and the venues where those instruments are traded?
Perhaps you’re a solicitor or a partner in a law firm? If you or a company you work for give legal advice to clients, then please read on, as MiFID II will also apply to you.
If you’ve answered yes to any of the above then you need to be aware of a piece of new EU legislation that comes into effect from January 3rd 2018.
Ok, so what does MiFID stand for? It stands for The Markets in Financial Instruments Directive. Companies that offer ANY financial or legal advice over the phone or face-to-face will have to abide by this new piece of legislation.
MiFID II’s (II) soul aim is to protect and strengthen protection to any investors, whilst also providing security to prevent any market abuse from companies that offer financial or legal advice. MiFID TWO (II) will also greatly increase transparency and re-establish consumer trust which has been badly damaged over the last 10 years.
To comply with the new MiFID II you or your company will be obliged to start recording all communications with your customers.
Mobile, VoIP, TDM, FACE to Face, SMS
There are two articles that you need to pay particular attention too, which are outlined below:
Article 16(7) of the Directive states that:
“Records shall include the recording of telephone conversations or electronic communications relating to, at least, transactions concluded when dealing on own account and the provision of client order services that relate to the reception, transmission and execution of client orders.”
Article 16(7) also makes it clear that:
“Such telephone conversations and electronic communications shall also include those that are intended to result in transactions concluded when dealing on own account or in the provision of client order services that relate to the reception, transmission and execution of client orders, even if those conversations or communications do not result in the conclusion of such transactions or in the provision of client order services.”
In addition, Recital 57 of the Directive states that:
“Such records should ensure that there is evidence to detect any behaviour that may have relevance in terms of market abuse, including when firms deal on own account.”
“Those records should be available to competent authorities in the fulfilment of their supervisory tasks and in the performance of enforcement actions under this Directive and under (the) Regulation”.
The term “electronic communications” within the MiFID II legislation is deliberately vague. This “Vagueness” will cover all future and current communications as the pace in which technology is changing so fast, this is the only suitable way to keep up the constant change in communications.
In order for your company to remain compliant to MiFID II you will have to remain dynamic to future technology changes.
At the time of writing this article and the current scope of electronic communications available today MiFID II covers fixed and mobile telephony systems, emails, SMS, MMS and instant messaging services including WhatsApp, Telegram, Facebook Messenger. If you use any of the above you and your company must investigate ways and invest in the necessary infrastructure which will allow you to record any communication via these electronic communications.
In addition to recording calls and electronic communications, MiFID II also introduces strict guidelines for the documentation of face-to-face meetings. Whilst MiFID II does not necessitate the recording of face-to-face meetings now, businesses would be prudent to consider the savings and benefits of a recording platform that supports face-to-face meetings capture as part of a wider, forward thinking MiFID TWO (ii) compliance strategy.
Since the UK voted to leave the EU, firms may now feel blurred as to whether the incoming MiFID II regulations will continue to apply to their businesses or not. With many firms, already unsure of their responsibilities under the Directive. The FCA has released a statement stating that: MiFID II will still apply in the UK and businesses must continue with their MiFID II implementation plans for the incoming legislation.
As a member of the G20, the UK and companies are obliged to implement legislation to meet the group’s commitments and reform agenda which have, in part, contributed to MiFID II. In fact, many of changes to MiFID have been made at the behest of the UK’s FCA which reiterated its position by issuing a statement on the morning of the referendum result that all firms should continue to work on its implementation. Moreover, the triggering of Article 50, now earmarked for the end of March 2017, initiates a two-year negotiation process which will continue beyond the 3 January 2018 implementation date. During this period, the UK will still be a full member of the EU.
With less than six months to go, (at the time of writing this), you or the company you work for don’t have long to comply with MiFID II.
To comply with MiFID II we would recommend that you carry out a full review of your current communications you carry out with your clients. So, if your company gives legal advice or financial advice to customers, new or existing by Mobile, VoIP, TDM, FACE to Face or SMS, you will have to make changes to your current policies before January 2018.
There will be substantial fines to companies who are compiling with the new legislation, MiFID II.
The size of these fine will be high for companies not complying with MiFID II. Remember, MiFID II. Has been designed and brought in to protect the consumer and non-compliance will be taken seriously.
To become MiFID II compliant there will be an investment required. Depending on the number of seats required prices do vary. We’ve outlined some of our basic MiFID II compliant packages below. If you’d like to speak to someone, we are here to help – please call 01225 800 808.
Gradwell can of course help you meet the new legislation as well as being on hand to answer any of your questions you may have.