MIFID 2 - LEIs

Q. What is the MiFID regulation?

A. In 2014 the original MiFID regime was repealed and gave way to the adoption of MiFID 2, a legislative framework comprising of both the Directive (MiFID 2) and the Regulation (MiFIR). MiFID 2 is one of the most significant regulatory changes that our industry will face in 2018. The directive impacts the entire investments lifecycle as it enhances and expands regulation of financial institutions within the European Economic Area (EEA) as well as those providing services cross-border.

 

Q. Why is there new regulation?

A.  The new MiFID regime is a response to the unanticipated consequences of the original MiFID legislation, taking into account the developments within the trading environment since MiFID I’s implementation as well as the lessons learnt from the 2008 financial crisis. The revised regime significantly enhances the current MiFID requirements.

 

Q. When will it be introduced?

A. MiFID 2 took effect from 3 January 2018

 

Q. What are the core objectives of MiFID 2?

A.

    Increased Market transparency

Increased investor protection

 

Increased integrity of the market and financial stability

Increased supervisory powers

 

Technological innovations

 

Increased oversight of commodity markets

High standards for managerial competence

Increased harmonisation of administrative sanctions

Increased alignment of regulation across the European Union (EU)

 

 

Q. What impact does Brexit have on MiFID2?

A. None at the moment.  The Financial Conduct Authority who implement any new European Directive within the UK Financial Services have said that firms must continue to plan for any changes.  Until the UK formally leaves the EU, the regulation surrounding MiFID2 will apply.  

 

Q. What specific changes will I see within MiFID 2?

A. There are a number of changes taking place and these are summarised below:

Subject area

 

What is the change?

Does this impact me?

Client Reporting – periodic reporting

MiFID 2 requires firms to send a periodic statement to discretionary clients every 3 months.  The previous period was every 6 months.

 

S&J already send periodic statements to our discretionary clients every 3 months so you will see no change.

 

 

Client Reporting – costs and charges

There is now a requirement to show the impact of costs and charges accrued over the year on discretionary portfolios.  This is an annual requirement.

S&J already include the impact of costs and charges on discretionary periodic statements so you will see very little change.

Material fall in value

MiFID 2 requires firms to notify discretionary clients if the performance of a portfolio decreases by 10% or more across a quarter.

In the unusual event of this occurring, S&J will notify you promptly.

Best Execution – Execution Venues

Firms will now be required to publicly display the top 5 execution venues used when executing transactions.

No direct impact however you will now see the execution venues that S&J use when executing deals on your behalf.

 

Q. I’ve been asked to complete a form relating to Legal Entity Identifiers – what are these?

A. A Legal Entity Identifier (LEI) is used as the identifier for the legal entity whenever it undertakes investment activity or an investment firm undertakes investment activity on its behalf in a reportable financial instrument such as equities and bonds. The unique LEI enables regulatory authorities in the UK and the rest of Europe to monitor trading activity with specific emphasis on market abuse and market manipulation.

 

Q. Who needs to complete an LEI?

A. Any client who is classed as a legal entity – in other words, anyone who is not an individual.  This will cover Trusts, Charities and Companies.

 

Q. If I have received one of these forms what do I need to do?

A. We need you to read the attached forms containing information relating to Legal Entity Identifiers, complete and return to us.

 

Q. What happens if I don’t take any action?

A. If you don’t read, complete and return the attached forms to us we will be unable to execute any transactions and/or transfer holdings.  It is important that you take action now.  No other financial institution will be able to provide services for you without an LEI.  This is not specific to S&J.

 

Q. Will this cost anything?

A. There is a charge for setting up LEI’s.  The London Stock Exchange charges £115 plus VAT for setting up a new LEI.

S&J will not charge for the administration work involved in obtaining LEI’s for our clients.

 

Q. How will you take this fee?

A. When we receive notification that your LEI has been registered we will debit your nominee account and write to you.

 

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