Project Summary

February 2006

The Association of British Insurers (ABI), the Association of Foreign Banks (AFB), the Association of Private Client Investment Managers and Stockbrokers (APCIMS), Bond Markets Association (BMA), the British Bankers' Association (BBA), the Building Societies Association (BSA), the Futures and Options Association (FOA), the International Capital Market Association (ICMA), the Investment Managers Association (IMA), the International Swaps and Derivatives Association (ISDA) and the London Investment Banking Association (LIBA) have put in place a five-stage project known as “MiFID Connect” for establishing a practical, cost-efficient and market-sensitive policy towards implementation of the Markets in Financial Instruments Directive (MiFID), in both the wholesale and retail financial service sectors, which is intended to reduce regulatory risk and provide real and tangible assistance to their member firms in terms of coming into compliance with the new requirements. Clifford Chance have been appointed as lawyers to the project. Between them, these Associations, which have formed themselves into the MiFID Connect Steering Group, represent the vast majority of banks and investment firms in the City and the UK that will be impacted by these new regulations.

The purposes of the project are:

•  to develop a set of focused industry guidelines to assist firms in those specific areas where implementation of MiFID carries a high degree of legal uncertainty and regulatory risk.

•  to provide specimen customer-facing documentation required under MiFID;

•  to produce a two-part ‘MiFID Survival Guide' for members of the participating associations for the purposes of timelining implementation and providing a check-list of actions;

•  to hold, through 2006, a series of co-ordinated implementation courses and specialist workshops on the practical problems and issues surrounding implementation of MiFID;

•  to issue through 2006, periodic releases and updates on changes in the timetable and in regulation, which will impact on the implementation process and which will need to be taken into account by firms when adopting the new requirements.

With regard to the proposed industry guidance , this will cover the high-risk areas of MIFID implementation where firms face considerable ambiguity or legal/regulatory uncertainty and it will include specimen customer documentation for benchmarking purposes. . The Group is working currently on “best execution”, “appropriateness”, “suitability” and “conflicts of interest management”. Other MiFID requirements, including customer classification, transaction reporting, internalisation and outsourcing have been identified as needing comparable guidance and these will be addressed during the course of the year. The Group recognises that if firms are to be expected to rely on industry guidance, it is important that the FSA and, as appropriate, other bodies are engaged in their development and that any guidance produced prior to finalisation of all the relevant requirements, regulations and regulatory guidance will need to be kept up-dated on a continuing basis.

In terms of MiFID implementation courses , the Group will look to hold a range of joint implementation courses on guidance and specimen documentation produced by it and on any other aspects of MiFID implementation deemed to be appropriate for joint presentation. These courses will be supplemented by the individual courses, seminars and workshops of the participating associations for their own memberships. So far as the courses are concerned, it is likely that the first course will be held in mid-2006 soon after the release of FSA's first major consultation on UK implementation of MiFID. Further courses will become necessary as the basis of that implementation and the anticipated Level 3 requirements become clearer and, in due course, finalised. It is important that these courses are held sufficiently in advance so as to provide firms with a further 4-6 months in which to introduce any last minute changes prior to the final MiFID implementation date.

With regard to the proposed Survival Guide , the Group has decided to issue the guide in two parts, namely:

•  Part 1, which will be issued in mid-2006 (to coincide with the first suggested implementation course indicated above) and which will comprise a strategy and plan for managing implementation; and

•  Part 2, which will be issued around late Spring, early Summertime will comprise a “tick box” checklist i.e. a comprehensive matrix summarising all the changes that firms will be expected to introduce by the date of implementation. (NB Its issuance at least 4 months before the final agreed date for implementation should leave a sufficient period of time to enable firms to “catch up” with changes not yet introduced).

In order to ensure that this programme of assistance is as practical and market sensitive as possible and meets firms' expectations in terms of structure, content and timing, the Group has established a Practitioner Advisory Committee to work in close co-operation with the participating associations. It comprises senior practitioners drawn from banks and investment firms, who between them, cover the whole spectrum of international, EU and domestic wholesale and retail investment products and services across the financial sector.

If you would like to know about this Group or wish to become a member of the Practitioner Advisory Committee or any of the project's constituent working groups, you should contact the MiFID Connect Secretariat at the British Bankers' Association.

Secretariat to the Group: British Bankers' Association

Pinners Hall

105-108 Old Broad Street

London EC2N 1EX

Michael McKee: telephone: 0207 216 8858 / 8851

Email: michael.mckee@bba.org.uk

www.mifidconnect.com

Chairman of the MiFID Connect: Anthony Belchambers, CEO, FOA.

Link to -

MIFID CONNECT PROJECT ORGANAGRAM

MiFID Connect Guidelines