MiFID II – Compliance Function Enhancements

Important Note

This is a summary of detailed analysis that ATEB has undertaken of the various 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;
• Click on ‘Show Timeline’;
• Select a date well into 2018; 
• Access the relevant handbook

Compliance Function

The FCA has enhanced the Senior Management Arrangements, Systems and Controls (SYSC) handbook requirements as part of MiFID ll.

Both MiFID and MiFID II require a Firm to have adequate policies and procedures in place to ensure compliance with its MiFID/MiFID II obligations, as well as appropriate rules governing personal transactions by its managers, employees and tied agents. However, as compared to the Implementing Directive, the Delegated Regulation imposes a number of new obligations relating in particular to the compliance function, senior management responsibility and complaints handling.

The changes apply in differing degrees depending on the type of firm. Firms will need to check the tables at the start of chapters to ensure they are referring to the correct sections. In general, the changes can be summarised as follows, however we would recommend you read the relevant EU articles that can be found by looking for page 268 from 1068 in the policy statement. 

Under both MiFID and MiFID II the compliance function must:

• Firm’s must have comprehensive and proportionate arrangements, processes and procedures in place;
• monitor and assess the adequacy and effectiveness of the compliance policies and procedures; and
• advise and assist relevant persons responsible for carrying out investment services and activities to comply with the Firm’s MiFID/MiFID II obligations.

However, the Delegated Regulation contains further detail as to what is required by way of compliance with these requirements, including the performance of a compliance risk assessment as a mandatory step. It also strengthens the connection between the compliance function and the management body in several respects, including through the introduction of annual and ad hoc reporting requirements.

Moreover, the Delegated Regulation specifically requires the compliance function to monitor the operations of the complaint-handling process and to consider complaints as a source of information in the context of its monitoring responsibilities.