The Financial Conduct Authority published a discussion paper on its proposals for implementing the Markets in Financial Instruments Directive II conduct of business and organizational requirements. The paper sets out the policy choices available to the FCA in implementing some provisions of MiFID II including: (i) the application of MiFID II to insurance-based investment products and pensions; (ii) the best approach to implementing the extended application of MiFID II’s investor protection requirements to the sale of and advice on structured deposits; (iii) whether a ban on discretionary investment management firms accepting commissions and other deposits is appropriate for retail client business; (iv) changing the criteria for local authorities’ treatment as elective professional clients; (v) adopting the new requirements for independent advice on shares, bonds, derivatives and structured products; (vi) extending the MiFID II remuneration rules for conduct of business to non-MiFID firms; and (viii) amending the UK approach to recording telephone conversations and electronic communications. The FCA paper also highlights key conduct of business changes that firms will be required to comply with from January 3, 2017. In particular, the paper discusses types of third party inducements that firms will be able to receive and the classification of products as either non-complex or complex, relevant to the determination of whether the appropriateness test must be applied. The FCA consultation closes on May 26, 2015. The FCA intends to consult fully on implementing the MiFID II requirements in December 2015 and to publish its final rules in June 2016.

View the FCA discussion paper.

View an FCA implementation timetable.

The European Securities and Markets Authority launched a consultation on proposed guidelines for the assessment of whether debt instruments and structured deposits are complex or not. Under the revised Markets in Financial Instruments Directive II, investment firms are able to provide reception, transmission and execution of orders for clients without carrying out the appropriateness test subject to certain conditions being met, including that the services do not relate to financial instruments that are (i) bonds, other forms of securitized debt and money market instruments incorporating a structure which makes it difficult for a client to understand the risk involved; or (ii) structured deposits incorporating a structure which makes it difficult for a client to understand the risk or return or the cost of exiting the product before term. ESMA is required to develop, by January 3, 2016, guidelines for the assessment of such instruments to help firms and national regulators classify correctly MiFID debt instruments and structured deposits as either complex or non-complex.

View ESMA’s consultation paper.