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FinTech Trends Newsletter Week 23rd October – 27th October 2017
MiFID II Issues for US & Foreign Managers
carry out a gap analysis by providing help & advice on MiFID II
regulatory technology solutions, reviewing a firm’s voice recording,
data capture and storage requirements accordingly.
One of the major topics for US & Foreign managers wishing or market funds in the UK from a legal, regulatory and tech i compliant perspective is MiFID II. Although the rules of the generally apply to EU managers based in the EU, they affect manager wishing to provide investment services to EU client has EU counterparties.
What is MiFID II?
The MiFID II Directive & the Markets in Financial Instruments tion (MiFIR) will repeal and recast MiFID with effect from 3rd Janurary 2018. Together, the MiFID II Directive and MiFIR (“MiFID II”) will form the legal framework governing the requirements applicable investment firms, trading venues, data reporting & capture providers and third-country firms providing investment services or activities in the EU.
Currently, the provision of investment services by non-EU, or third country, firms is largely subject to national law in each EU Member State which has led to varying rules, requirements and exclusions. The UK domestic laws will continue to apply to established branches in the UK, which means third country firms who establish branches in the UK will not be able to benefit from the MiFID II branch passport, but will have to establish a legal subsidiary with appropriate MiFID authorisations. US & Foreign firms which have established a full subsidiary in the UK which is authorised and regulated as a MiFID firm by the FCA will be subject to compliance with all aspects of MiFID II regulation in respect of such subsidiary. The scope of this note does not extend to discussion of MiFID II in relation to such managers, but focuses on US & Foreign managers operating outside of the UK only.
How does MiFID II affect US & Foreign managers?
Under the present MiFID rules, a US & Foreign manager which does not have a place of business in the UK, may operate within the UK without falling within scope of MiFID; this position will generally remain the same under MiFID II. However, new rules introduced by MiFID II relating to, for example, market transparency, taping and voice recording and data capture and storage requirements may impact third country firms, either directly or indirectly.
Taping and Voice Recording Obligations
MiFID II enhances record keeping requirements, such that firms are required to record telephone conversations or electronic communications relating to client orders and to keep such records for 5 years and for the regulators 7 years. The FCA has extended this requirement to cover all discretionary investment managers. Once again, this is likely to impact US & Foreign managers acting as sub-investment managers, who could be expected to comply with the new requirements in order to ensure compliance by the investment manager. The MiFID II taping rules also raise potential issues in relation to employment law, as they require an investment firm to take all reasonable steps to prevent an employee or contractor from making, sending or receiving relevant telephone conversations and electronic communications on privately-owned equipment which the investment firm is unable to record or copy. There is also no doubt that, upon request by the regulator, firms including any subsidiary firms who have established branches in the UK, will have to be able to quickly reconstruct events based on recorded conversations, data, files and emails. Firms are required to provide all data evidence relating to an FCA investigation to be readily available within 72 hours of a request by the regulator.
As mentioned above, we anticipate that US & Foreign managers may need to amend or be required to amend their taping and voice recording, data capture and storage obligations. The relevant amendments for all firms and subsidiaries will be impacted and covered by the MiFID II directive.
Storm IT Financial are able to assist US & Foreign managers to carry out a gap analysis by providing help and advice on MiFID II regulatory technology solutions, reviewing a firm’s data capture and storage requirements accordingly.
For help & guidance to prepare & advise Hedge Fund, Wealth Management, Asset Management, Private Equity & Alternative Investment firms on IT, MiFID II Call Recording Compliant Solutions, data storage & management, disaster recovery, back up, cybersecurity, managed solutions, FCA, MiFID II & GDPR regulatory & compliance technology, please contact Storm IT Financial for more information
Storm IT Financial FinTech News & Trends picks: Week 23rd October – 27th October 2017
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https://www.ft.com/content/07e9f83a-b583-11e7-aa26-bb002965bce8?mhq5j=e5
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https://www.ft.com/content/739f8954-b61a-11e7-a398-73d59db9e399?mhq5j=e5
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