The importance of the regulation to all kinds of financial businesses is not in doubt, neither is the impact its implementation will have on the industry. The question comes when we look at how companies are making their compliance investment work. Looking at where they choose to prioritise capital and the types of systems they put in place will determine how they perform in the years to come.
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MiFID II has a number of key objectives comprising:
- increased investor protection
- alignment of regulation across the EU in certain areas
- increased competition across the financial markets
- introduction of reinforced supervisory powers
To meet these aims, MiFID II contains a broad range of complex provisions. These include:
Protection for investors
MiFID II aims to introduce significant controls to avoid conflicts of interest that encourage greater transparency before and after sales take place and to prohibit commissions payable in respect of investment advice and portfolio management.
MiFID II provides for increased powers of supervision, coordinated with the European Securities and Markets Authority (ESMA). This means that interventions will be permitted on both a pre and post-execution basis, with wider general powers to oversee governance processes and to intervene where deemed necessary.
MiFID II will further emphasise the importance of compliance, audit and risk management functions, in production and marketing of new financial instruments, reporting, and conflicts of interest. Measures to prioritise the interests of clients and the integrity of the financial markets see more robust requirements for management functions.
Shockingly 1 in 6 (16%) of our survey sample of financial services professionals were unaware of the MiFID II compliance deadline with 1 in 3 (33%) admitting they didn’t feel personally prepared for the implementation of the directive.