There’s been lots in the news recently about the Markets in Financial Instruments Directive II (MiFID II) legislation introduced on 3rd January 2018.

We want to keep our clients informed — so it’s worth taking a look at what this obscure-sounding legislation is and how it will affect you.

Chancellor Financial Management are actually a MiFID exempt organisation — so MiFID II doesn’t substantively change the way we operate. But there are some aspects of the legislation that we (and investment firms) have to comply with.

Essentially, the new rules mean a few changes to business reporting, but they’ll have little effect on you as a client — and you can expect the same excellent standards of service.

So what is it?

The first raft of MiFID legislation was introduced in 2007 with the aim of reducing overall trading costs for investors and ending the monopoly of stock exchanges.

MiFID II will bolster the original version by increasing consumer protection in areas like off-exchange markets like derivatives and bonds.

It aims to:

• Increase investor confidence after the 2007 crash
• Make European markets more transparent and safe
• Migrate some over-the-counter trading to regulated trading venues

MiFID II covers:

• Currencies
• Futures
• Fixed income commodities
• Equities markets
• Retail derivatives
• Exchange rated products

So the legislation covers practically all aspects of trading in the EU — for more information on its background, take a look at this ESMA article.

How does it affect Chancellor Financial Management?

In short, MiFID II requires any company involved in financial management to be as transparent as possible to clients and regulators.

In simple terms, this means a greater focus on providing detailed reports to relevant parties more regularly.

For more detailed information on industry-wide MiFID II transparency requirements, please browse this LSEG article.

But these are a few of the steps investment firms are taking to ensure compliance:

• Providing detailed quarterly valuation reports for clients as well as annual statements of charges and costs.
• Informing clients immediately if the value of a portfolio falls by more than 10 per cent from the start of a quarter.
• Strengthening suitability assessment processes for investments and generate more detailed suitability reports for clients.
• Ensuring product governance evidence is collected and collated so it can be reported to authorities and stakeholders.

As a client, how does it affect me?

The overarching aim of the legislation is to enhance your consumer protection, but it will have little practical effect on you as a client. Most MiFID II requirements were already in place in the UK under FCA guidelines prior to its introduction — so in many ways it’s ‘business as usual’ for clients.

Unfortunately, the greater emphasis on reporting likely means that we and/or investment firms may have to provide you with paperwork more regularly — this is a mandatory requirement of MiFID II compliance.

We want to keep you informed without overloading you with irrelevant information — so we’ll provide tailored MiFID II updates as and when the need arises.

We hope the above information provides you with MiFID II peace of mind, but please get in touch with us today if you’d like to chat further.

For more industry insights on the latest financial management topics, take a look at the following articles:

• What changes to the Trusts Register do you need to be aware of?
• The case for inheritance tax — for and against
• What’s happening with DB pension schemes?