TISA publishes “MiFID II – Appropriateness Approach to Implementation” Guide
TISA, the financial services membership organisation, has published a “MiFID II – Appropriateness Approach to Implementation” guide to provide firms with greater clarity and understanding around their appropriateness assessments, ahead of the implementation of MiFID II on 3rd January 2018.
Published by TISA and supported by a working group of 52 firms, the guide sets out a recommended approach to firms performing appropriateness assessments to ensure that they are consistent and not excessively onerous to implement.
MiFID II is a significant piece of regulation which will have a major impact on the financial services industry. TISA believes that, regardless of Brexit, MiFID II will continue to apply to UK financial services and will be incorporated into UK regulation.
Appropriateness assessments apply to complex products provided on a non-advised basis. Investment Trusts, NURS and AIFs, which may be considered complex, will be assessed on a case by case basis. UCITS products will continue to be deemed non-complex and will not require an appropriateness assessment.
MiFID II makes changes to existing requirements, increasing the scope of products for which an appropriateness assessment must be undertaken. This means that firms may need to determine a customer’s or potential customer’s knowledge and experience of specific product types or of services being sold. Appropriateness assessments will be required for some direct-offer or non-advised businesses, but are not when suitability is determined in advised or discretionary businesses.
Jeffrey Mushens, Technical Policy Director at TISA said:
“As firms get ready to implement MiFID II, it’s important that they understand some of the key areas of focus. Product appropriateness is a central issue. As a result of the changes from MiFID I to MiFID II, the number of firms performing appropriateness assessments is likely to increase.
“The Directive makes it clear that there is a responsibility on the product manufacturer and the distributor to ensure that complex products are appropriate for customers buying without advice. Where a customer is advised, the adviser is responsible for determining whether a product is suitable. So Distributors are required to assess whether the product is appropriate – an Appropriateness Test that the investor has to ‘pass’. If the investor fails the appropriateness test, they still may be allowed to buy the product, but a warning will be given saying that it may not be appropriate. The Directive increases expectations on existing systems and controls.”
Mushens continues, “We are pleased with the support and input we’ve received from across the industry. TISA is helping its members and the wider industry to understand the implications of MiFID II and to present their views and recommendations to the FCA. MiFID II will impact firms’ product development and governance process, relationships with distributors and, crucially, how firms report costs and charges to customers. We see this as an opportunity to complement existing regulatory and guidance and develop standards for the industry in these key areas.”
TISA has established working groups to develop guides in Appropriateness, Product Governance, and Costs & Charges covered by FCA Conduct. These groups will establish standardised processes, common definitions and market practices that meet the needs of firms and customers, and that satisfy the regulatory obligations placed on firms. The “MiFID II – Appropriateness Approach to Implementation” is the first of a series of approach to implementation guides. Alex Denny, Fidelity International is the Chair and Christine Brentani, Legal & General Investment Management is Deputy chair of TISA’s MiFID II Executive Committee on Appropriateness.
The full guide “MiFID II – Appropriateness Approach to Implementation” can be found here.
TISA is holding a seminar on MiFID II in Edinburgh on September 26, and London on September 28, which will address the issues raised by the FCA in their Consultation on Conduct issues, including Appropriateness, Product Governance and Costs & Charges. For more details click here.
Ends
For further information please contact:
Sara Neidle – Telephone: 020 7680 6543 / Email: Sara.Neidle@newgatecomms.com
Alistair Kellie – Telephone: 0207 680 6558 /Email: Alistair.Kellie@newgatecomms.com
Email: TISA@newgatecomms.com
Notes for Editors
TISA is a not-for-profit membership association operating within the financial services industry. The focus of our recommendations and actions is improved outcomes for consumers and UK plc with this approach leading to a stronger UK financial services industry.
TISA’s growing membership comprises over 150 firms involved in the supply and distribution of savings and investment products and services. These members represent many different sectors of the financial services industry, including asset managers, insurance companies, fund managers, distributors, building societies, investment managers, third party administrators, consultants and advisers, software providers, financial advisers, pension providers, banks and stockbrokers.
TISA has a successful track record in working cooperatively with government, regulators, HMT, DWP and HMRC to improve the performance of the industry and the outcomes for the public. Effective policy and regulation and the creation of efficient industry infrastructure continues to be the major focus for our members. TISA is unique in that it represents the entire financial services industry, incorporating cross-sector policy, industry and technical expertise. Whilst we maintain a solid partnership with government, the regulators and wider industry, we remain independent and develop neutral views and opinions. This impartiality is reflected in our ability to drive development projects3which improve industry performance and consumer outcomes, putting us in the unique position of being able to constantly challenge the status quo to bring about material improvement.