MiFID II

Since 2007, the aim of the EU’s Markets in Financial Instruments Directive (MiFID) has been to establish a regulatory framework for the provision of investment services and the operation of regulated markets by banks and other market participants within the EU.

The MiFID II regime, which came into force on January 3, 2018, has revised and complemented the rules previously in place, in particular by extending the scope of regulated products and activities.

MiFID II aims to establish a safer, sounder, more transparent and more responsible financial system by:

• Extending market transparency
• Strengthening investor protection
• Providing partially harmonised rules for third-country firms to access the EU market
• Ensuring harmonisation of administrative sanctions and effective cooperation between authorities
• Improving competition in the trading and clearing of financial instruments

Since MiFID-regulated firms service the entire fund industry value chain, MiFID II has an impact on investment funds, management companies and AIFMs.

Product governance

• Product approval process
• Target market identification and assessment
• Rules on conflicts of interests

Inducements and payment for research

• Ban or increased restrictions regarding the receipt and retention of fees, commission, and monetary and non-monetary benefits
• Handling of unbundled research payments

Client information

• Full transparency on all costs, including transaction expenses, relating to products and services
• Extension of retail information requirements to professionals
• Standardisation and exchange of data from manufacturers and distributors
• Information flows

Complex and non-complex products

• Extension of the scope of complex products
• Increase in range of products that cannot be sold on execution-only basis

Other key features and requirements of the MiFID II regime may directly or indirectly affect the investment fund industry, for example in terms of investor protection, transparency and reporting.

Analysis of the impact of the regime on a particular structure:

• Impact assessment of key provisions of MiFID II and gap analysis
• Distribution network mapping and inducement impact analysis
• Support in identification and definition of target market

Drafting or review of documentation:

• Drafting or review of appropriate disclosures in prospectuses
• Drafting or review of distribution and investment management agreements
• Review of marketing materials

Procedures and implementation:

• Creation of checklists for client information compliance
• Support services regarding fund data creation and sharing
• Drafting or review of procedures
• Design and implementation of MiFID II-compliant target distribution models

Uniquely in Luxembourg, Arendt’s approach combines legal advice, regulatory and compliance services to meet the growing need of our clients for comprehensive support provided in the most efficient manner.