On Monday, the UK’s Financial Services authority (FSA) released its latest consultation paper on the EC’s Markets in Financial Instruments Directive (MiFID). This paper, CP 06/14 – Implementing MiFID for Firms and Markets, covered client monies, regulated markets, transparency for equities and various aspects of how UK regulation would be handled. The consultation period ends October 31st, and the FSA will publish feedback in January 2007 together with the made rules and guidance which will take effect from November 1st, 2007.
Whilst the FSA’s paper is informative on many points and will provide valuable guidance to the current implementation activities going on in firms, there are still areas where questions remain unanswered. The main one of these is the overall legal scope of the UK implementation. Although it was in May this year the Treasury published a summary of responses to its December 2005 consultation, it will not finalise the necessary legislative changes before the end of 2006. In other areas the FSA highlights changes that will occur that are outside its control. Chief of these are that they will have little or no ability to grant waivers under the MiFID regime and firms are warned that current waivers are unlikely to continue after November 2007.
A key area that still poses many questions is the cross-border issue. It is unclear how MiFID will affect firms incorporated outside the European Union (or European Economic Area - EEA) who provide services into the EEA from overseas offices or who operate through tied braches within the EEA. Equally, there is still ambiguity regarding those impacted firms operating across Europe and which regulator will supervise which parts of the activity. The FSA refers to work being undertaken by the Committee of European Securities Regulators and encourages firms to become involved.
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