Mastering MiFID II: Investor Protection


Assessing the Business Process and Technology Challenges for Buyside Firms

This report summarises the challenges presented by the second iteration of the EU’s Markets in Financial Instruments Directive (MiFID II) to buyside firms with European operations in the context of investor protection, and it provides recommendations in terms of what buyside firms must do to comply with the requirements by the implementation deadline. By providing an overview of the technology and process changes that buyside organisations must undertake globally to enhance their investor protection practices, the report helps firms to avoid sanctions that will result from non-compliance with the regulatory mandates.

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MiFID II was designed to both stabilise financial markets and to protect individual investors. As the implementation process across the EU for MiFID II draws to a close, asset managers and institutional investors must be prepared for the January 2018 implementation deadline.

The report subdivides the aspects of MiFID II requirements pertaining to investor protection into areas for consideration including record-keeping, product governance and sales-related compliance, transparency of costs, inducements and client reporting. Each section of the report summarises the relevant areas of the regulation, and it includes a table detailing the impacts on business processes and technology, which incorporates best practice recommendations for buyside firms in complying with the regulation.

Published on: 14 Sep, 2016

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Mastering MiFID II: Investor Protection – Table of Contents

  • 1.0 MiFID II Changes to Investor Protection Requirements
    • 1.1 Protecting the End-investor
    • 1.2 Regulatory Revisions and their Impacts
  • 2.0 Record-keeping
    • 2.1 Textual Record-keeping
    • 2.2 Voice Recording of Client Communications
    • 2.3 Algorithmic Trading Records
    • 2.4 Required Changes and Recommendations
  • 3.0 Product Governance and Sales-related Compliance
    • 3.1 Product Approval Process
    • 3.2 Definition and Verification of Target Markets
    • 3.3 Client Classification and Best Interests
    • 3.4 Competence
    • 3.5 Suitability Testing of End-investor Clients
    • 3.6 Execution-only Service Provision and Appropriateness Testing
    • 3.7 Bundled Services and Cross-Selling
    • 3.8 Required Changes and Recommendations
  • 4.0 Informing the End-investor Client
    • 4.1 Transparency of Costs
    • 4.2 Inducements
    • 4.3 Client Reporting
    • 4.4 Required Changes and Recommendations
  • 5.0 Codifying and Clarifying Existing Practices
    • 5.1 Organisational Requirements and Risk Controls
    • 5.2 Enhanced Accountability of Management Functions
    • 5.3 Remuneration Provisions
    • 5.4 Client Asset Protection
    • 5.5 Complaints Handling
    • 5.6 Required Changes and Recommendations
  • 6.0 Appendices
    • 6.1 Glossary of Terms
    • 6.2. Table of Figures