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Not another MiFID II round up...

Having worked across the financial services sector for the last 7 years, I have only ever seen this market in a state of continuous flux and transition post-recession. The Investment and Corporate banks were the first to be scrutinised to reduce the risk of another crash however now, more recently, it is the Asset and Wealth Management sectors who are under the regulatory spotlight.

Mifid II round up image

Interim Partners recently held a seminar on the evolving MiFID II regulations, with the deadline 1st January 2018, and the impact these will have on the sector in light of the recent Brexit vote. This discussion and my knowledge of the sector have led me to think about the key issues that must be addressed as Giles Kenwright, head of regulatory advisory at Delta Capita, says ‘market participants face a race against the clock just over a year out from implementation.’

First and foremost, the scale of the change required by regulators goes beyond a mere checklist of guidelines. These new processes will require a cultural shift by the whole company as regulators ensure, quite rightly so, that there is transparency of information and the investor is protected. Firms will now have to ‘live and breathe’ regulations and ensure they are compliant across the board. The moral question of what is ‘fair’ must be at the forefront of every decision and any company trades must be customer-centric, a shift from the current sales-centred mentality.

The ‘every man for himself’ attitude in some areas of financial services must also be eradicated as firms will be required to take collective responsibility. New regulations will make it difficult to proportion blame and the new Senior Managers Regime (SMR),put in place in March 2016, requires CEOs and other senior executives to know exactly what is going on. Companies can no-longer rely on anything being ‘swept under the carpet’ and must ensure they have good succession planning to reduce risk.

Alongside the focus on compliance, Asset and Wealth Management firms must ensure their IT systems have the regulations at their core, with one article stating that ‘events affecting an order or trade will need to be recorded to the millionth of a second in cases where computer logic is involved in the decision making process.’ The recent papers from the ESMA will outline technological guidelines and instructions to set out guidelines to assist companies in their implementations.

There is a huge to think about and although the deadline, having been pushed back once already, is in 2018 there is no time to lose. The changes businesses need to make to adhere to these new regulations are extensive and span from attitude to technical application. The biggest need we see in the market is for experienced Programme Directors who can pull all of this together, this is not the sole responsibility of the CCO or Compliance Director.

SMR (or more technically SMCR) is the latest catalyst moving businesses (some previously procrastinating) to prioritise their change programmes and ensure have a suitable regulatory framework and adequate change resources to assist these implementations.

It is important that we embrace the change and do so quickly, as Bob “buy-side” Dylan famously sang ‘times they are a changin’. The FCA will be coming down on those not prepared; and with the SMR piece in place the stakes have been raised for those at the top.

I welcome your thoughts and comments.


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