MiFID II Disclosure Article 4 – Periodic Reporting

MiFID II: Disclosure Article 4: Periodic Reporting

Important Note

This is a summary of detailed analysis that ATEB has undertaken of the disclosure requirements detailed in the MiFID II Policy Statement. Our full analysis will be discussed with ATEB clients as part of our ongoing service arrangements.

This article is one of a series. It is biased towards ‘typical’ ATEB clients. It is a very high-level summary and does not therefore cover every MiFID connotation. It does include our interpretation of the requirements, where there is a lack of clarity, and should therefore be used with discretion and read with a questioning attitude.

All firms should read the Policy Statement.

Accessing the FCA Handbook

We do not replicate FCA rules in this article, but refer to them. The made rules are contained in the annex to the Policy Statement but to access the relevant rules as they will be in their final context, you will need to forward date the FCA handbook. To do this:

  • Go to the FCA Handbook provide link ;
  • Click on ‘Show Timeline’;
  • Select a date well into 2018;
  • Access the relevant handbook.

Periodic Reporting

Pre-MiFID II, firms with reporting requirements had to report on a six-monthly basis, but under MiFID II, the requirement is to report every three months. That is, or should be, no great hardship for firms. Other than the increased frequency, it is business as normal, with providers and platforms meeting this requirement.

However, primarily driven by the new requirement to also report to clients when the value of the portfolio reduces by 10%, we have become aware that some firms, in particular DFMs that manage model portfolios on a platform (who say that they have no contractual relationship with the client) have been suggesting that the adviser firm will have the responsibility for at least the 10% element of reporting. We cannot possibly envisage how this would be the case, not least because of the complexity involved, so we sought clarification from the FCA. Eventually, we obtained an answer that could barely qualify as ‘clear’ and required one of our best minds to decipher!

We won’t bore you with references to delegated regulation articles and the like, but our interpretation and conclusions are as follows:

  1. The firm providing the portfolio management service is responsible for doing the reporting, which seems both logical and consistent with what happens now;
  2. If the firm knows that someone else is doing the reporting, then the firm does not need to do the reporting;
  3. If the firm provides online access to the required information that would otherwise be in a report AND has the ability to identify that the client has accessed that information during the relevant quarter, then the reporting requirement is satisfied.

Potential issues:

  • Firms who operate in-house model portfolios could feasibly be responsible for the reporting, but see 2 above;
  • If the DFM is merely running a model portfolio on a platform then they may have no contractual link with the investor and may suggest that the platform or indeed the adviser carries the responsibility for reporting.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

ATEB Suitability provides report writing software for the financial services market.

Our View

In all honesty, we cannot see that this will impact the vast majority of ATEB clients.

However, a word of warning. You need to check that you are categorically not responsible, and by so doing, confirm where the responsibility lies.

We have highlighted on previous occasions the sometimes blurred lines that exist where there is a tripartite arrangement between client, DFM and advisory firm. This is often a point of agency law. If you are part of this type of model portfolio triangle, discuss the responsibilities with the DFM.

Action Required By You

It’s a matter of checking.

ATEB clients should speak with their account manager as necessary; otherwise contact ATEB here to find out how we can help.

About the Author

Technical Manager - Often referred to as the Oracle or the Sage, Alistair has a wealth of financial services experience. He is our go-to Technical Manager and enjoys nothing more than a complicated conundrum. Feel free to test his renowned knowledge by getting in touch.

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