Repeated delays to MiFID II have frustrated market participants, and these have undermined their planning processes. This uncertainty – coupled with a lack of clarity over various MiFID II specificities – have caused issues among fund distributors and manufacturers.
MiFID II was supposed to be enacted in January 2017. Industry pressure succeeded in pushing implementation back by one year until January 2018. Most market participants including fund managers acknowledged that acclimatising their systems and technologies to MiFID II obligations was going to be a protracted (and costly) process and the original time-frame was too ambitious. The delay, which was confirmed earlier this year by the European Commission (EC), has given firms more flexibility to build or update their systems and processes, but it has also had unintended consequences.
A survey commissioned by Calastone found that nearly a quarter of respondents were aware of MiFID II and its impact. The survey also found that more than half were also aware of MiFID II but were “either concentrating on other legislation or trying to assess it [MiFID II] in conjunction with other legislation.” The delay in publicising the final details around MiFID II has clearly led to some fund managers sitting on the side-lines as they await further clarification on the Directive’s minutiae details. Fourteen per-cent told the Calastone study they were waiting for final details on MiFID II.
As is to be expected, this regulatory uncertainty has prompted firms to delay implementing compliance strategies. Only 13 per-cent of respondents contacted by Calastone have implemented measures designed to enable compliance with MiFID II, while 28% are in the planning stages but have yet to enact their strategies. The sheer breadth and depth of MiFID II is such that even with the benefit of the delay, fund managers still have enormous amounts of work to do. Gap analysis must be undertaken and working plans involving personnel and service providers must be acted upon.
Fund managers are also facing or have faced a barrage of global regulation including the Alternative Investment Fund Managers Directive (AIFMD), the European Markets Infrastructure Regulation (EMIR), the Foreign Account Tax Compliance Act (FATCA), UCITS V, Solvency II and Dodd-Frank, just as way of example.
This has posed many challenges, but it is important that MiFID II become a focus area for these managers now. A failure to be compliant with MiFID II come January 2018 will not be received well by regulators, particularly as they initiated a delay for the exact purpose of giving the industry more time and scope to attain compliance.
