Forefront Communications

Financial News: What to Do When the FCA Comes Knocking on Mifid II

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Sam Belden

Sam Belden

By Emma Margetts, Head of European Operations, Visible Alpha

Many in the investment community were taken by surprise in June when the Financial Conduct Authority said it would begin conducting audits of brokers and fund managers to ensure they were all properly complying with regulations under the EU’s revised Markets in Financial Instruments Directive.

It is probably fair to say Mifid II implementation did not get off to flying start at the beginning of the year, with the UK watchdog dragging its heels in providing clarity on the application and timelines for the implementation of the rules.

In the six months since the rules have been in place, the FCA has remained quiet, and the probe announcement is the regulator’s first signal that it is expecting progress to have been made.

These laws were designed to usher in a new era of transparency and boost investors’ trust, forcing asset managers to ‘unbundle’, or separate, the cost of research from execution to prevent conflicts of interest. But instead, the general sentiment across the buyside community has been that of frustration at the lack of transparency and guidance from the FCA to date.

Firms are estimated to have collectively spent over $2bn getting themselves in line with the regime, and yet confusion remains, as the regulations are inundated with complexity – at around 7,000 pages long, it is five times longer than Tolstoy’s War and Peace – which has unsurprisingly led to some ongoing legal uncertainties.

So what will the FCA review first and what do firms need to have ready?

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