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Should Mifid II be reviewed post-Brexit?

Think tank New City Initiative has called for parts of Mifid II to be reviewed after Brexit. We asked our readers if they agree.

Mifid II review

A week after prime minister Theresa May triggered Article 50 and Brexit negotiations officially got under way, New City Initiative (NCI) warned Mifid II needs to be reviewed.

While the UK government and the regulator have confirmed that all existing and incoming EU laws will be enforced despite Brexit, some fund managers are pushing to use it as an opportunity to review rules.

The think tank feels that because of Mifid II, UK fund managers may be at a disadvantage to those in the US and the rest of the world, where research restrictions do not exist. With the UK having to stand on its own feet now, this could be crucial.

'There is a very real risk that Mifid II research restrictions will put UK asset management firms at a competitive disadvantage to firms in the US and the rest of the world, which do not have to comply with the same EU regulations,' NCI head of policy Jonathon Read said.

We ask four wealth managers how they feel.

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Mifid II review

A week after prime minister Theresa May triggered Article 50 and Brexit negotiations officially got under way, New City Initiative (NCI) warned Mifid II needs to be reviewed.

While the UK government and the regulator have confirmed that all existing and incoming EU laws will be enforced despite Brexit, some fund managers are pushing to use it as an opportunity to review rules.

The think tank feels that because of Mifid II, UK fund managers may be at a disadvantage to those in the US and the rest of the world, where research restrictions do not exist. With the UK having to stand on its own feet now, this could be crucial.

'There is a very real risk that Mifid II research restrictions will put UK asset management firms at a competitive disadvantage to firms in the US and the rest of the world, which do not have to comply with the same EU regulations,' NCI head of policy Jonathon Read said.

We ask four wealth managers how they feel.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

David Loudon, Redmayne-Bentley, Leeds

‘We all know the requirement to comply with Mifid II by next January is fixed. It’s a challenging target, but firms are already advanced in their preparations and as with all new standards, once implemented, most of the hard work will have been done.

‘While there are valid arguments that some of the work is of questionable benefit for clients, that is not to suggest that it should all be reversed when the finality of Brexit arrives. As we move forward though, the FCA should critically review all rules which increase costs and complexity, and inevitably impact on clients. Complex rules do not necessarily protect clients or markets, and I believe the FCA recognises this (and has in the past strongly influenced European rules).

'Our hope must be that in the future, freed from the (even) more bureaucratic tendencies of European regulators, they can help firms to bring the benefits of bespoke investment management to more and more of the clients who need them.'

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Andrew Coveney, Equerry Investment Management, London

‘In a word, no. Mifid II’s start date is January 2018, the UK will still be part of the European Union (EU) and deep in the process of negotiating the country’s exit from the bloc.

‘So Mifid II will be adopted by the UK at that stage and the UK will be setting a new course and redefining itself overall. Put another way, Mifid II will be just another aspect of the UK’s exit which needs to be considered and while this is an area of significant importance for those involved with financial services, there are likely to be more important topics of interest to the wider public (and to therefore to politicians).

'Much depends on the basis of the UK’s future relationship with the EU and the specific terms of the exit agreement. Financial services are a key component of the UK economy and access to European markets will be a priority. With this in mind, the scope for meaningful changes to Mifid II post-Brexit appears limited.’

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Simon Reeks, Midas Investment Management, Manchester

‘I don’t think it is a case of “should” European regulation be reviewed after Brexit, I think it will have to be. On a basic level, leaving the European Union (EU) would mean loss of the Mifid passport as well as the loss of passports accessible under other pieces of single market legislation relevant to financial institutions.

'Until the terms of Brexit are clear, we do not know the degree to which some rights may remain, whether for example because the UK leaves the EU, but remains in the EEA, or by bilateral agreement. However, in any event, the so-called third-country provisions under Mifid II may provide some firms with an alternative means of access to the single market.

‘The UK government and the regulators have a challenging task ahead of them, not least because of the sheer quantity of UK legislation derived from EU law that will need to be reviewed. However, post-Brexit these will need to be reviewed again.

‘For the moment, UK firms should just continue as instructed by the regulators, and prepare to implement Mifid II in line with its requirements. It is likely to be some significant time before there will be a clear enough picture of the terms of exit for any firm to take a final decision on its position.'

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Andrew Gilbert, Parmenion, Edinburgh

‘The second Markets in Financial Instruments Directive (Mifid II) and the Markets in Financial Instruments and Amending Regulation (Mifid) are designed to provide a European wide framework for regulating financial markets, which is a significant step forward from Mifid I in 2007.

‘Several of the key objectives in Mifid (e.g. increasing investor protection, aligning regulation to enhance competition and increasing regulatory powers) are closely aligned with the FCA’s guidance towards increasing transparency, lowering costs (principally via eliminating commission) and enhancing disclosure and are therefore clearly in the interests of the majority of UK investors.

‘As such, whilst Mifid will likely be reviewed as part of the “Great Repeal Bill”, they should initially be incorporated into UK law to avoid de-stabilising the industry and the positive transformative momentum which has been generated and great care should be taken over making any significant changes to ensure the spirit of the regulation is not lost in the politics.’

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