Implementation of MiFID II: Part 2

Published on 28 April 2017

Implementation of MiFID II: Part 2 – PS9/17

Overview

This Prudential Regulation Authority (PRA) policy statement (PS) provides final policy as part of the PRA’s transposition of the Markets in Financial Instruments Directive II (MiFID II) following Consultation Paper (CP) 43/16 ‘Implementation of MiFID II: Part 2’. This is part of a legislative package, comprising the Directive, MiFID II (2014/65/EU); the Markets in Financial Instruments Regulation (2014/600/EU) (MiFIR); and Commission Delegated Regulation on organisational requirements and operating conditions (the ‘Delegated Regulation’). In the interests of a coherent approach to corporate governance, these MiFID II requirements are aligned, as far as possible, to requirements under CRD IV.

This PS is relevant to banks, building societies, PRA-designated investment firms and their qualifying parent undertakings, which for this purpose comprise financial holding companies and mixed financial holding companies, as well as credit institutions, investment firms and financial institutions that are subsidiaries of these firms.

Feedback on consultation responses

The PRA received no responses to CP43/16. The final rules are as consulted, with some minor drafting changes to the instruments to clarify language, correct formatting and referencing (see Appendices 1-4). Appendices 5-7 include links to three supervisory statements (SSs). The three SSs have been updated to refer to MiFID II where previously they referred to MiFID I, and associated implementing directives.

Implementation

MiFID II will apply from Wednesday 3 January 2018 and Member States must transpose their provisions in national legislation and regulations by Monday 3 July 2017. The PRA's rules, and the relevant sections of the SSs that apply to MiFID II, (Appendices 1-7) will take effect from Wednesday 3 January 2018.

Chapter 2 outlines the implementation arrangements for:

granting authorisations in respect of a new MiFID investment activity, ‘operation of an organised trading facility (OTF)’, a new MiFID financial instrument ‘emission allowances’, and regulated activities of dealing, advising, managing and arranging structured deposits. Firms should submit complete applications for variation of permission by 3 July 2017; and
notification to the PRA for firms wishing to carry out the following activities: Structured deposit in respect of the regulated activities; Dealing in investment as principle; Arranging deals in investment; Making arrangements with a view to transactions in investment; Managing investments; and Advising on investments.

Further information is available on the authorisations ‘Variation of permission’ webpages.

Policy Statement 9/17

Appendices

Published on 25 November 2016

Implementation of MiFID II: Part 2 – CP43/16

In this consultation paper (CP) the Prudential Regulation Authority (PRA) sets out its proposals for rules to transpose parts of the Markets in Financial Instruments Directive (MiFID II). This is part of a legislative package, comprising the Directive, MiFID II (2014/65/EU); the Markets in Financial Instruments Regulation (2014/600/EU) (MiFIR); and Commission Delegated Regulation on organisational requirements and operating conditions (the ‘Delegated Regulation’).

The CP is relevant to banks, building societies, PRA-designated investment firms and their qualifying parent undertakings, which for this purpose comprise financial holding companies and mixed financial holding companies, as well as credit institutions, PRA-designated investment firms and financial institutions that are subsidiaries of these firms.

This is the second PRA consultation on implementing MiFID II, and follows CP9/16 ‘Implementation of MiFID II: Part 1’, which consulted on implementation of the MiFID II passporting regime and algorithmic trading. The final rules following CP9/16 were published in Policy Statement 29/16.

Summary of proposals

This CP includes proposals to enhance governance through MiFID II management body requirements and key organisational requirements which will apply to MiFID and non-MiFID business. In the interests of a coherent approach to corporate governance these MiFID II requirements are aligned, as far as possible, to requirements under CRD IV. As there is also a directly applicable EU regulation which prescribes more detailed requirements in those areas for MiFID business and firms in scope, those specific matters will no longer be subject to PRA rules. The PRA sets out its proposed approach to how those management body and organisational requirements will apply to non-MiFID business.

The PRA also sets out proposals for granting authorisations in respect of a new MiFID investment activity, ‘operation of an organised trading facility (OTF)’, a new MiFID financial instrument ‘emission allowances’ and structured deposits. The power for the PRA to accept applications from firms for these permissions in advance of 3 January 2018 may be granted by HM Treasury (HMT) in a statutory instrument. If the PRA is granted this power, the PRA proposes that firms would be able to apply for permissions in advance of 3 January 2018.

The PRA also sets out proposals for consequential amendments under the General Provisions Part and the Glossary.

Responses and next steps

This consultation closed on Monday 27 February 2017.

The proposed implementation date for the proposals in this CP is 1 January 2018.

Consultation Paper 43/16