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The UK supervisor, the Financial Services Authority (FSA) yesterday handed out a pre-Christmas present in the form of a new Consultation Paper “CP07/23: Organisational systems and controls - extending the common platform” which proposes extending the scope of the Markets in Financial Instruments Directive (MiFID) beyond its current reach to previously exempt firms.
MiFID currently covers the investment advice, order execution and portfolio management of investment banks, portfolio managers (fund managers, unit trusts and pension funds), stockbrokers, broker dealers and inter-dealer brokers, and corporate finance firms as well as some, partially or wholly, futures, options and commodity firms, hedge funds and private equity funds.
The new document proposes extending the “common platform” of MiFID to a wide definition of previously excluded firms including insurance intermediaries, mortgage brokers, venture capital and personal investment firms, commodity firms and energy and oil market participants, credit unions, UCITS and collective investment schemes, custodians and pension schemes. UK branches of overseas firms are also included and only insurers, including the Lloyds market, and managing agents would be excluded.
The proposals concern the internal affairs of firms (FSA Handbook sections SYSC, Chapters 4 -10) – management oversight and systems and controls including general organisational requirements for employees and other relevant persons, compliance and financial crime, risk control, outsourcing, and record keeping. They do not, yet, include the client-directed services such as client advice and best execution, but will be sending the compliance teams at these previously excluded companies into a flurry of Christmas reading.
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