MiFID II leniency could be coming from the FCA for diligent firms

The deeper EU financial firms are engaged with complying with the upcoming MiFID II regulations, the greater the challenges.

Going into effect this coming January, MiFID II regulation includes a wide range of subject matter. Included are new reporting requirements and corporate governance obligations.

As a result of the new regulatory burden, many firms are finding that compliance will be tougher than expected. An example is Trade and Transaction Reporting that is introduced under MiFIR legislation.


Unique MiFID II challenges

While real time and daily reporting has been in place since 2007 with MiFID I and EMIR in 2014, MiFID II has its own unique challenges. Among them are understanding ‘just what trades are under scope’ and including client and internal traders personal detail in reports. As a result, even when resources exist to tackle MiFID II, companies are often asking more questions than they can find answers to.

These challenges appear not to be lost on regulators. As a result, financial regulators may focus first on company intent to comply with MiFID II, than the quality of report submissions.


Lenient enforcement (to some)

Speaking on the subject of supervising MiFID II compliance, Mark Steward, Executive Director of Enforcement and Market Oversight at the UK Financial Conduct Authority (FCA) stated
“We will not take a strict liability approach especially given the size, complexity and magnitude of the changes that are required.”

The comments were cited in a conference in London and covered by Reuters. Steward explained that the FCA’s leniency will be directed towards firms that are taking steps to comply with the regulation, but may not be meeting all of the new requirements.

However, according to the Steward, firms shouldn’t take his comments to mean that the FCA is planning to be complacent with MiFID II enforcement. Steward explained that the FCA will mostly likely take a different approach towards firms that haven’t made serious attempts to comply with the new regulation.

Overall, the initial lenient stance by the FCA is one that will be welcome by brokers, banks and other financial firms. With so many outstanding question marks and several regulators yet to open testing environments for receiving MiFID II reports, full compliance is expected to be work in progress when the regulations goes live in 2018.

Ron Finberg
About the author: Ron Finberg
Ron is Executive Director, Product Specialist at S&P Global Market Intelligence Cappitech and helps customers with their compliance of EMIR, MIFIR, SFTR, MAS and ASIC derivative reporting. Ron is an ongoing contributor of regulatory focused content and webinars and leverages his over 20 years’ experience in the financial industry. He was also awarded the Editor’s Recognition Award for Best RegTech Vendor Professional in the RegTech Insight Europe Awards 2021.