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There are 15 days to go until the Markets in Financial Instruments Directive (MiFID) becomes operational. Best execution, market transparency, appropriateness of services, cross-border permissions, client classification, the lot, all will be expected to be effective from November 1st. Should we be worried? There are conflicting messages.
On one hand there are reports that large numbers of firms will seriously miss the deadlines and that the job market has disintegrated into a feeding frenzy. London laggards and European mainland late comers are reported to be trying to buy their way out of trouble by recruiting experienced implementation staff from those who are or are soon to be MiFID-compliant. We also hear that large numbers of London firms themselves will miss the deadlines and research by stockbrokers, Bell Lawrie, suggests that 70% of independent financial advisors will miss the deadline and that 90% are not sure what they should be doing (so 20% have done something but are not sure what!).
However, the FSA has been slow to rattle the sword and seems to be taking the view that, as long as the big players are in line – and so far none of these are reported as missing the deadlines in any significant form – they will take a relaxed view of the smaller brokers, IFAs, etc. The FSA has consistently held back from issuing firm guidelines, preferring small firms to work out the necessary levels of compliance themselves. This has caused anguish – but is in line with EU principles.
It seems that many firms, in the mid to small bracket, are taking a minimal compliance approach – helped by the fact that the majority of vendors, both software and services, have taken the initiative in MiFID-impacted products and, in order to protect their market shares, have long developed all the necessary bells and whistles required by the new directive. This approach, whilst understandable, may result in the savings, forecast by the FSA in its cost-benefit analysis of MiFID, not actually being achieved, or, at best, to come later. Alan Jenkins, Europe MiFID lead at consultancy BearingPoint, says “Primarily it is a legal compliance and business problem, and a lot of companies are taking a compliance-only response. But if more firms had invested in technology you would have seen improvements within six to nine months rather than a year-and-a-half.”
Am I worried? Probably not. And no one has offered me a job yet! Desperation clearly has its limits.
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