MiFID implementation and approved persons changes - changes to the FSA Register
1 November 2007
The Markets in Financial Instruments Directive (MiFID) comes into force today (Thursday, 1 November), replacing the Investment Services Directive (ISD). At the same time, changes to the approved persons regime have also come into force - some of these changes flow from MiFID implementation and some stem from a broader review aimed at streamlining that regime.
As a result of this if you are involved in investment business then you maybe affected by these changes.
This document highlights changes to firms' permission, passporting rights and approved persons which are now recorded on the FSA Register. The information detailed below shows you, in detail, what has changed – you should check your updated records on the FSA Register to make sure that you are familiar with the new layout and the information shown is correct
In the MiFID Permissions and Notifications Guide published in May 2007 (May PNG) we said that we were working with the Treasury on transitional arrangements to reduce the administrative burden on firms. We have successfully applied those transitional arrangements and these changes are now reflected in revised firm records found on the FSA Register.
Permissions
MiFID changes the definition of designated investment business client categories. Broadly speaking, firms that previously classified clients as private customers, intermediate customers and market counterparties (or a mixture of those) will now categorise them respectively as:
- retail clients;
- professional clients; and
- eligible counterparties.
As we mentioned in the May PNG, we have now applied the relevant transitional arrangements the Treasury provided and have made the necessary changes to firms' records.
You should check your firm's records on the FSA Register to ensure your designated investment business activities are accurately recorded.
We have also amended existing requirements and/or limitations that referred to the previous client classifications to reflect the new MiFID definitions.
Again, please check the appropriate amendments have been made to your firm's permission where it would be affected.
Using transitional arrangements, we have given those firms who had permission to operate an alternative trading system (ATS) the new activity of 'operating a multi-lateral trading facility' (MTF).
If you have any queries regarding amended permissions please contact our Firms Contact Centre helpline on 0845 606 9966 or email fcc@fsa.gov.uk.
Application of the Article 3 exemption
Article 3 is an optional exemption under MiFID for certain types of firms which the UK has decided to implement. Firms that meet the qualifying criteria (predominately Financial Advisers) will not be subject to MiFID rule requirements. In the May PNG, we explained how the UK intended to implement the Article 3 MiFID exemption. Transitional arrangements mean that firms who meet the qualifying conditions are deemed exempt and have been 'opted out automatically'.
If you believe your firm meets the Article 3 exemption, please refer to the May PNG and then check the FSA's Register to ensure that the relevant exemption requirement is in place.
Financial advisers who advise clients who live in Europe should read our factsheet.
If you have any queries you should contact the Firms Contact Centre helpline on 0845 606 9966 or email fcc@fsa.gov.uk.
Passporting
We have automatically changed existing ISD passports to MiFID passports. So MiFID firms (which does not include Article 3 exempt firms) can continue to conduct investment business under a corresponding MiFID passport. For details of the relevant 'mapping' of ISD activities, services and financial instruments to MiFID equivalents, please see Annex 2 of the May PNG. These changes are now reflected on the FSA register.
Firms should check their revised records, referring to the May PNG for further guidance.
You will need to complete a Passport Notification Form if you are a:
- firm wishing to extend its MiFID passports to include additional investment services activities and/or ancillary services; or
- a bank wishing to take advantage of the range of MiFID activities available to you under the Banking Consolidation Directive, as outlined in Annex 3 of the May PNG.
Financial Advisers and passporting
For the first time, Financial Advisers (other than those who prefer to be exempt under Article 3) that only provide 'investment advice' have the opportunity to passport into the EEA providing, of course, that they have applied for the relevant authorisation permission. If you are a Financial Adviser wishing to opt in to MiFID in order to provide investment services to clients in other EEA states you should have completed the 'Financial Advisers seeking to opt-in to MiFID' form.
Our factsheet gives help and information for financial advisers who wish to continue to advise their clients who live in Europe after 1 November 2007.
If you have any questions on passporting, please contact the Firms Contact Centre helpline on 0845 606 9966 or email fcc@fsa.gov.uk.
Approved persons
From today, various controlled functions are merging into one over-arching function for each group. All new applications we approve from today will reflect the new functions. In addition, under MiFID the responsibility for apportionment and oversight of key responsiblities in MiFID firms will become the collective responsibility of management rather than being allocated to specific individuals.
During November, we will convert all relevant 'controlled functions' into the new functions and withdraw the CF8 function from individuals approved in all MiFID firms. Previous controlled function(s) will show an end date of 31 October 2007 and we aim to have the FSA Register updated by the end of November 2007. Firms should view the register of approved persons in December and email any queries to iva@fsa.gov.uk.
For more information see the Appoved Persons pages.
Tied agents
As set out in the May PNG, we have automatically identified any appointed representatives of UK firms undertaking MiFID business. Unless firms have notified us to the contrary, we have marked these as tied agents on the FSA Register. Firms should check the revised records and, if the appointed representatives are only undertaking non-MiFID business on their behalf, tell us by emailing iva@fsa.gov.uk.