The Markets in Financial Instruments Directive II was published in the Official Journal of the EU in June and all EU firms must reach compliance by January 2017.
According to Sokhanvari, while the goal of increased transparency is a laudable one, the regulation will among other things put pressure on systems and IT resources and “will also open a wider scope for inadvertent regulatory breach and associated reputational damage”.
He adds that the shortening timelines for delivery create issues, as do the clash of inconsistent definitions between separate regulations.
While the attempt to bring together multiple asset classes under a single framework, incompatible national standards, and a lack of clear guidance will likely prove challenging.
“In the UK, the FCA has a stated aim of increasing competition within the industry. MiFID II threatens to promote increased costs and higher capital requirements for wealth managers. This will inevitably threaten the client-focused specialist boutiques and non-bank wealth managers which UK regulators have done so well to foster,” he says.
There is no doubt that MiFID II will have a wide-ranging impact on the regulation of investment services and activities in the EU, but Sokhanvari points out that much of the detail remains to be filled in under level two legislation and ESMA technical standards.
“The full picture will not emerge until this process is complete. In many areas it will be necessary for firms to expend vital resource at a much earlier stage to ensure compliance with the new regime,” he warns.
