On July 3, the UK Financial Conduct Authority (FCA) published its second policy statement (PS17/14) on implementation of the revised Markets in Financial Instruments Directive (MiFID II) into FCA rules. PS17/14 follows the first policy statement on MiFID II published in March 2017 (for further information see the April 7 Corporate Financial Weekly Digest ).
PS17/14 covers feedback received from a number of the FCA’s previous consultation papers in relation to MiFID II and provides draft amendments to the FCA’s rules. Topics covered include a number of different conduct-related areas, highlights of which are:
- Inducements in relation to research. The FCA will extend the scope of MiFID II rules on inducements to apply the provisions to collective portfolio managers (i.e., Undertakings for Collective Investment in Transferable Securities (UCITS) managers and alternative investment fund managers (AIFMS)), and not only to those investment firms that are subject to MiFID II. In response to consultation feedback, the FCA amended its guidance on how quickly research charge deductions should be passed into a research payment account (RPA) to allow greater flexibility. The FCA also clarified that it does not intend to require investment managers to have a single RPA per research budget, and offers concessions on trial periods for research and the issue of whether ex-ante pricing of research is required.
- Client categorization. The FCA is revising its proposals for criteria for local authorities, opting up to professional client status. The revised criteria have a lower threshold for the size of portfolio that a local authority has to have, and makes it easier for local authorities investing on behalf of a local government pension scheme pension fund to opt-up to professional client status, if they wish.
- Best execution. The FCA will not apply the changes in the best execution rules in MiFID II to AIFMs. The FCA will, however, apply the MiFID II best execution standards to firms authorized under the UCITS Directive.
- Taping. The FCA will remove the current partial exemption in its taping rules for discretionary investment managers and make some modifications to the way the rule applies.
Alongside PS17/14, the FCA has also published its sixth consultation paper (CP17/19) on the implementation of MiFID II. CP17/19 covers small issues the FCA has not previously consulted on, such as the Financial Services Compensation Scheme cover for trading venues. The consultation period for CP17/19 closes on September 7,and the FCA aims to finalize the necessary rules changes by November 2017.