While retailers gear up for the Christmas countdown, the clock is also ticking for overworked compliance teams to get to grips with the complexities of MiFID II as they work towards the 3 January 2018 implementation date.
There are a number of grey areas still to be worked out, with a lack of clarity in areas like displaying costs and charges, cost/benefit analysis on switching, and client reporting.
So what does the FCA expect firms to have achieved by the deadline?
In terms of solving the problem of how to inform clients within one working day when their portfolio has fallen by 10% or more, the regulator apparently “recognises there are variances between
firm models but expects firms to work together to achieve the appropriate deliverables”.
DFMs are now urging platforms to reveal their individual solutions quickly so they have enough time to put their own processes in place.
Meanwhile, it is understood a key focus for the regulator looking at wealth firms will be on good documentation and reporting of the investment decision-making process.
This will include ensuring key individuals take ownership of this process and it is reviewed regularly, documentation is up-to-date, and there is consistent application across the business.
Questions will also be asked about how often suitability is discussed at company board meetings and what information will be fed back to the board from investment committees.
He said: “The key thing is that firms are confident about what they do know, rather than worrying about what they don’t. If there are grey areas, they can be worked out in implementation.”
Cornwall added firms will need to demonstrate they have had good project plans in place from the beginning, with engagement from senior management, “covering everything you could do in that time”.
“If there are areas you are not quite up to speed on and your peer group are in a similar position, you are going to be in a better position from the perspective of regulators,” he said.
Clearly, the regulator cannot expect all these issues to be resolved in a matter of weeks.
But although FCA executive director of enforcement and market oversight Mark Steward warned last week it will not “create a floor below” full MiFID II compliance standards, he said the regulator was prepared to “act proportionately” for firms that have made the necessary preparations.
The direction of travel is clear and firms will remain under pressure over the coming months to show how they are working to meet the deadline to the best of their abilities.
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