EMEA FINANCE
Is MiFID II still fit for purpose in a post-COVID financial landscape? January 2nd, 2021 was the third anniversary of the implementation of MiFID II, a legislative framework instituted by the European Union (EU) to regulate financial markets in the bloc and improve protections for investors. This second iteration of the Markets in Financial Instruments Directive includes a range of binding obligations for financial traders, including the need to record and store any/all external communications that could result in a trade, for a minimum of five years. MiFID II is a complex piece of legislation to put it mildly and compliance requires a great deal of time and effort. Despite this, its ‘real-world’ value currently remains subject to debate. While the EU Regulator recently stated 1 that rules around investment research and analysis had been a success, it has previously conceded 2 aspects of MiFID II targeting marketing data costs have been less so. In a wider sense, industry professionals affected by the new legislation
134 | Issue 22
have extremely mixed feelings about its benefits and detriments 3, both to their work as individuals and to the financial sector as a whole. However, one thing that is clear is the imposition of financial penalties associated with non-compliance to MiFID II is likely to increase significantly in the near future. Under the original MiFID legislation, many high-profile organisations, including Goldman Sachs International 4 , received fines running into tens of millions of pounds for failing to report transactions in an accurate and timely fashion. Conversely, less than â‚Ź2 million in fines were handed out under MiFID II in the whole of 2019. Many industry commentators attribute this low figure to a grace period for the new legislation, with the Financial Conduct Authority (FCA) giving firms some wiggle room as they acclimatise to it. But as this period ends, fines and penalties are expected to skyrocket.
