31 January 2007

Article 4 of MiFID's Level 2 implementing Directive limits the scope for Member States to apply additional requirements in certain of the areas covered by MiFID. It sets out the conditions for creating or retaining such national requirements that go beyond MiFID and requires that these be notified and justified to the European Commission.

As we said in our October 2006 consultation CP06/19: Reforming conduct of business regulation, after careful consideration and cost benefit analysis, we are proposing to retain requirements in a small number of areas which appear likely to require notification to the Commission under Article 4. We have already dropped many other existing requirements as part of our NEWCOB review.

HM Treasury have notified to the Commission our intention to make certain additional requirements. The notifications remain as we proposed in CP06/19 and are presented with the justifications for their retention. With the exception of requirements concerning apportionment of responsibilities within a firm, the rules upon which these notifications are based are still subject to consultation.

We will be discussing these notifications with the Commission in parallel with our consultation process and, should any further notifications to the Commission be needed when we have made our final rules, then HM Treasury will again make them on our behalf. If you would like to comment on these notifications, please do as part of the open consultation on cp06_19@fsa.gov.uk

We will feed back on these responses in the NEWCOB Policy Statement in the second quarter of this year. Additionally, a number of the proposed rules covered by the provisional notifications will, if made, be the subject of further policy review during 2007 and 2008. We will continue to keep you informed of developments throughout the process.

Article 4 notifications