FCA suggest an element of MiFID II forbearance – but don’t put the brakes on!

5 October 2017

There are now a little less than 90 days to go until MiFID II comes into effect. A number of firms have let it be known to the FCA that they are concerned that they may not in all cases be fully compliant by 3 January 2018. The FCA has moved to allay some of those fears by suggesting a certain degree of regulatory forbearance will be provided come January 2018.

In late September, Mark Steward, executive director of enforcement and market oversight at the FCA, speaking at a conference for the Association of Financial Markets in Europe (“AFME”), indicated that the regulator would not take immediate disciplinary action against firms failing to comply by the January deadline. However, this was heavily caveated with a warning that this generosity would only be extended to firms able to evidence to the FCA they had acted on a best efforts basis in their attempts to ensure compliance by the January deadline. Steward told delegates at the conference that: “we have no intention of taking enforcement action against firms for not meeting all requirements straight away where there is evidence they have taken sufficient steps to meet new obligations by the start-date, 3 January 2018.”

Steward did however warn in the same speech that whilst the FCA was not minded to take a “strict liability approach” given the “magnitude of the changes that are required to be in place”, in cases where firms had not made a “real or genuine attempt to be ready or where key obligations are deliberately flouted”, there would be little leniency shown. Steward went on to say that although there was an understanding of the difficulties of adopting some of the MiFID II requirements by January 2018, the FCA was not able to “create a floor for compliance below the required MiFID II standards”.

This information will no doubt go some way to reassuring many firms however, firms should take heed of Steward’s warning regarding preparedness, and should not see his statements as an excuse to take their foot off the gas with regard to MiFID II implementation. Firms unable to demonstrate to the FCA they have been working towards MiFID II compliance will be in a perilous position.

How can Bovill help?

Our sole activity is the provision of high-quality, technically-focused advice and consultancy services on all aspects of financial services regulation. We are subject matter experts in MiFID II, and are currently working with a number of our clients as they get to grips with the challenges in the year ahead.
We can help you to mitigate the rising compliance risk associated with MiFID II implementation:

  • We can run a gap analysis – using our in-house MiFID II gap analysis framework, we can help you to identify the areas of MiFID II with the greatest impact for your business, and shape a plan to deliver the required change.
  • We can perform compliance-focussed reviews – we can review the work you have done so far, project plans, proposed solutions and operating models to help you determine whether you are on-track to achieve compliance.
  • We can provide MiFID II change resources – our teams of compliance and change experts can be deployed to address specific projects and work streams within a broader MiFID II programme – supplementing your existing resources, and tackling some of the trickiest compliance issues.
  • We can embed MiFID II experts within your change teams – experts on the ground, working alongside change professionals, can be a powerful tool in assuring that compliance is delivered effectively. We can work with your change teams to ensure that MiFID II is interpreted correctly, and the right outcomes are achieved from both a compliance and business perspective.
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