FSA transposes MiFID on tight schedule

Jan 29 2007 Peter Elstob

Belchambers: FSA deserves credit for fulfilling a difficult mandate

The Financial Services Authority has transposed the Markets in Financial Instruments Directive, with three working days to spare. On January 26 it published a policy statement and Handbook text finalising its transposition of MiFID for the firms it regulates. Hector Sants, the FSA's managing director for wholesale markets, said that timely transposition had been achieved largely due to the cooperation and commitment of the industry throughout the consultation process.

"We believe we have stuck to our commitment to minimise the burden on firms by adopting a proportionate approach to implementation. As we have already indicated, implementation of MiFID will represent a substantial cost to industry but it does create the potential for revenue opportunities over the longer term, and we would encourage firms to focus on these opportunities," Sants said.

The FSA published separately a policy statement on reforming the approved persons scheme, ensuring that the MiFID-related changes to the Handbook were completed.

Where credit's due

Anthony Belchambers, chief executive of the Futures and Options Association, said the FSA deserved credit for having fulfilled a difficult mandate in a very tight timetable. He warned, however, that the implementation of MiFID went beyond the actions of the FSA. As firms considered how they would come into compliance with the new requirements, it had to be borne in mind that the MiFID-related work of the Committee of European Securities Regulators was unlikely to materialise before April.

"Some of those issues CESR is still working on — best execution, branch regulation, inducements, transaction reporting — are not only important; a number of them are pretty systems-orientated," Belchambers pointed out. Firms would therefore need time to put these in place, in terms of testing and back-testing systems. The time involved in re-papering clients with new requirements and educating staff would also mean that firms could find it difficult to make the November 1 deadline for going live with MiFID compliance.

"If that's true in the UK, with transposition taking place on the required date, where does that leave the other member states? And come November, it could look very patchy: buckets of legal risk in various places, a certain amount of regulatory risk, and question marks over what is and what is not passportable," Belchambers told Complinet.

Speaking to reporters on the sidelines of the World Economic Forum in Davos, EU internal market commissioner Charlie McCreevy said that most EU states would have transposed MiFID into their legislation by the end of March.

But Belchambers stressed that the credibility of the single market in financial services turned on how quickly and how seriously the outstanding issues were addressed, at both the national and EU levels.

"Even if the regulators decided not to be hardnosed about timely transposition in other member states, customers may not be so forgiving," he warned.

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