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MiFID II Policy Statement: still not had a chance to read it?

14 July 2017. Published by Rachael Ellis, Associate

Rachael Ellis summarises some of the FCA's key new conduct requirements arising from MiFID II now that it has published its final rules.

While firms takeaway and digest the FCA's latest MiFID II policy statement , this blog takes a snapshot of the FCA's now final rules in some key conduct areas and considers what changes, if any, have been made to the draft rules consulted on (in the third consultation paper  ). We have already blogged   on the policy statement's 4-digit page count. It will therefore come as some relief to firms that in a number of areas the rules will keep substantially to the draft form:

  • the new chapter containing product governance rules ("PROD") requires product manufacturers and distributors to take into account the 'end client' and build appropriate information sharing systems into the supply chain.  (We note that there was a minor change: the deletion of the guidance in PROD 3.2.12G on target market assessment which the FCA has stated that firms can find instead in this ESMA paper )
  • the new suitability rules, in relation to which the FCA has confirmed that the (new) COBS 9A – applicable to MiFID business - will not be changed from the draft version
  • The rules on client agreements will be those set out in the draft rules. These require firms to enter into a basic written agreement with professional as well as retail clients, and this must be done for each investment service or ancillary service

In relation to the FCA's inducement rules it was more of a mixed picture. As proposed:

  • The existing RDR ban on advisers from accepting inducements in relation to advice on retail investment products to retail clients will continue

  • The ban on accepting inducements will be extended to firms which provide independent or restricted advice or portfolio management services to retail clients, preventing them from accepting and rebating monetary benefits to such clients

  • The new rule that only non-monetary benefits can be accepted in relation to advice on retail investment products - not just those falling under MiFID II – will come in

    However:

  • the FCA will consult again on the proposal to apply the inducements ban more widely to a firm's business of providing advice (and not just in relation to specific personal recommendations); and

  • Finally, the FCA will not extend the ban on receiving and rebating monetary benefits (other than 'minor non-monetary benefits') in relation to services to professional clients