UK regulators say they will take a pragmatic approach to any minor non-compliance from member firms when the EU's Markets in Financial Instruments Directive (MiFID) formally comes into effect in November.
MiFID project teams at leading City banks say lack of final guidance on transaction reporting and best execution is hampering efforts to meet the looming deadline. But provided organisations are making "reasonable efforts" and all decisions are well documented, regulators say they will take a pragmatic approach to any minor non-compliance come November.
At this week’s Securities & Investment Institute event, 'MiFID: Are You Ready for Implementation?’, representatives from the European Commission (EC), Committee of European Securities Regulators (CESR), and the Financial Services Authority (FSA) presented on current progress in locking down the final requirements for MiFID. A number of MiFID project heads from buy side and sell-side institutions also shared their approaches and concerns about the regulation and looming deadline.
Nathalie de Basaldúa, the EC’s head of unit for securities markets, spoke of the actions the Commission plans to take to encourage the 22 countries yet to transpose the directive into national regulation to do so. These include ‘naming and shaming’ and direct contact between the Commissioner and finance ministers. She also recommended the industry continue to put pressure on CESR to deliver the outstanding Level 3 guidance.
Carlo Comporti, deputy to the secretary general, CESR, says that it expects the entire Level 3 work programme, including the guidance on best execution and transaction reporting, to be completed by the end of April.
But for at least one bank, Barclays Capital, this won’t be soon enough. Although it has been able to start some areas of work where requirements are known, MiFID project manager Patrick Ludden says that his project team will have to give business requirements to the IT teams this month if they are to meet the November deadline. This is despite the fact that all technical details for best execution and transaction reporting will not be known, and may change.
However, Barclays Captial and others say they are not contemplating missing the deadline and that it "is still achievable if regulators provide timely and consistent guidance".
Ludden and representatives from Citibank, Charles Stanley Stockbrokers and Russel Investment Group, also agreed that most organisations are too busy worrying about the November deadline to take a view on whether MiFID could provide any strategic opportunities.
Given the lack of current lack of clarity on some aspects of the regulation, Chris Hibben, head of the MiFID implementation office at the FSA, says that the UK will be taking a pragmatic approach to enforcement after the November deadline, and will conduct “risk based reviews based on what organisations have done, looking first and foremost at areas where non-compliance is material.”
Nathalie de Basaldua stressed that while there is no chance that the deadline will be moved, the EC would be encouraging all European regulators to take such a pragmatic view.
Anthony Belchambers, chairman of industry group MiFID Connect who also chaired the conference, gave Finextra an overview of themes discussed at the event. You can watch his seven-minute summary in this video.