Update

European Regulation

	The Markets in Financial Instruments Directive (“MiFID”)

The Commission's final proposed text for Level 2 has now been publicised and it is anticipated that it will be finalised in the summer, bearing in mind that the EU Parliament has three months in which to review the text. In the usual way, the FOA will be undertaking its own review of the Commission's proposal and will be putting forward suggested amendments directly to the Commission as well as to MEPs. If any member firm has any particular observations that they would like to be reflected by way of an amendment, perhaps they could let Anthony Belchambers know as soon as possible.

In terms of “MiFID Connect”, since the issuance of the last Update, three industry associations have joined the project, namely, the Association of British Insurers, the Building Societies Association and the International Swaps and Derivatives Association. Full details of the project are set out in a slightly revised version of the summary circulated recently to all Member Contacts and which is now posted on the FOA website, together with various target areas for guidance and an organogram showing how the project will be administered.

The Steering Group of industry associations are meeting on a regular basis with Mike Folger and Chris Hibben, who is leading on MiFID implementation for the FSA. The Group have also met with HM Treasury, the Chairmen of the Practitioner Panel and the Smaller Business Panel and are meeting shortly with the Chairman of the Consumer Panel to outline the project and the critical importance of the industry acting in a unified way and having an effective “imprint” on the policy and process of implementing the new MiFID requirements, as well as reducing regulatory and legal certainty through the issuance of industry guidance. By way of a general update:

•  The Steering Group are considering the viability and merits of encouraging broader EU participation in order to facilitate firms being able (if they wish) to adopt a pan-EU approach to implementation when conducting investment business either cross-border or from a place of business elsewhere in the EU. In this context, we would welcome the thoughts of FOA members, bearing in mind that, firstly, the approach to implementation and individual member state super-equivalence may mean that an industry interpretation that works in the UK may not be wholly applicable in other member states and, secondly, while work has commenced on various draft guidance, any form of “roll out” could not take place until finalisation of Level 2.

•  Continued delays in the MiFID implementation timetable will impact on the work of MiFID Connect and leave a shorter period of regulatory certainty for firms coming into compliance with the new requirements. However, starting work in advance of finalisation of the regulatory requirements will have the advantage of exposing major implementation problems at an early stage and will help to inform the FSA of those problems prior to commencing the process of formal consultation.

•  With regard to the list of topics to be covered by the proposed guidance, the Group has formed the view that inducements should be included and that clarification in some of the home/host requirements may be helpful, but that a strong interface of systems and controls with the CRD means that it is unlikely that the scope of the work will cover systems and controls (although the Associations may either jointly or individually cover this topic for their memberships outside of “MiFID Connect”).

	The Markets in Financial Instruments Directive (“MiFID”) cont...

Jane Green is working with the FOA Compliance Committee to establish a MiFID Working Group which will be responsible for looking at the various draft guidelines produced under “MiFID Connect”, particularly in the context of their own financial markets and service activities in derivatives to ensure that the recommendations are cost-efficient, practical and acceptable. If you have any particular questions on any of the points mentioned above or would like to have more information about “MiFID Connect” please contact Anthony Belchambers; if you or a colleague would like to become a member of the MiFID Working Group, please contact Jane Green.

As has previously been confirmed, the FOA will be reviewing the entirety of its standardised documentation library for the purpose of ensuring that it meets all the new MiFID requirements. However, this process will not be able to be commenced until there is greater legal certainty surrounding the process of implementation in the UK.

	EU/US Financial Services Regulatory Dialogue

On 13 December, the FOA attended and made a short presentation at a CFTC “roundtable” on the Transatlantic Dialogue in Financial Services. It is also now working with Clifford Chance on a more detailed set of priority areas for regulatory action that would lend themselves to early action in terms of regulatory convergence i.e. which are practical, comparatively apolitical and will deliver effective cost savings for firms in their cross-border dealings (and the FOA and the other participating associations in the Coalition will be consulting on that list with their memberships). We are also putting in place a round of visits with parliamentarians, government departments, regulatory authorities and other interested organisations in both the EU and the US at the end of February to:

•  argue for convergence between the industry list for priority regulatory action and the regulators' own priorities for convergence;

•  press for a mechanism that will include ongoing and continued industry input into the Dialogue.

	The revised Basel Accord and the Commission's proposal for a new capital requirements framework for banks and investment firms