EU member states must implement the new Directive on Markets in Financial Instruments Directive (MiFID II) and the new Regulation on Markets in Financial Instruments (MiFIR) into national law by 3 July 2017, before the new rules come into effect on 3 January, 2018.
The rules require member states to designate “competent authorities” for the purposes of MiFID II and MiFIR, which will have power to remove a person from the management board of an investment firm, credit institution, or recognised investment exchange to enable them to fulfil their duties under MiFID II.
Provisions concerning third-country (non-EU) firms supplying investment services in the EU are outlined, and limits placed on the size of positions that can be held in commodity derivatives.
Controls are imposed relating to algorithmic trading and direct electronic access on certain firms and individuals (e.g., insurance undertakings) that are otherwise exempt from MiFID II, and new duties to inform the European Securities and Markets Authority (ESMA) of certain matters are also created.
In its report on the implications for businesses of the new regime—MiFID II: Time to take action,—EY said there will be enhanced requirements regarding governing bodies of investment firms, including the issues of diversity and compliance, as well as ensuring that members have sufficient time to undertake their duties.
It added: “A ‘fit and proper’ test is also being introduced for such members, requiring them to have knowledge, skill and experience to understand the risks of the business.
“Firms will also be required to have a remuneration policy that encourages responsible business conduct and fair treatment of clients and avoids conflicts of interest.”