Laven Partners Regulatory News Alert – July 2011


The European Commission announced a review of the Markets in Financial Instruments Directive (MiFID) with a consultation paper issued in December 2010. The review will aim to address some of the weakest points of the original directive.

The level 1 rules of MiFID II are due for release later this year, the release date having been postponed already. The amended directive is expected to result in a significantly revised version and the new rules would come into effect in 2013.

Some of the main areas where MiFID II would likely bring about changes are those related to the conduct of business rules. We have outlined some of the most interesting or contentious proposals below:

  • Banning third party inducements in the case of portfolio management
  • Limitation on the exemptions available to eligible counterparties (ECP). For example, classification as an ECP may not be available in relation to complex products (such as asset backed securities and non-standard OTC derivatives).
  • Removal of presumption of necessary level of experience and knowledge for professional clients. In practice, this would require suitability assessments on professional clients to be more akin to assessments on retail clients.
  • More detailed requirements on portfolio managers in relation to best execution. Aim is to improve the quality of disclosures made to clients.
  • Proposition of civil liability for breaches of MiFID rules. It remains to be seen how this will impact the current civil liability regime in place in the UK.

It is expected that the FSA will provide detailed ‘approach documents’ regarding the transposition of MiFID II into the FSA Handbook once the directive is finalised.

Should you be concerned about any of the proposals relating to MiFID II, please do not hesitate to contact us.

FSA Changes to the Approved Persons Regime

In September 2010, the FSA announced changes to the Approved Persons regime in relation to individuals holding Significant Influence Functions. These changes relate to the governing body (such as directors and partners) and those holding systems and controls and significant management functions.

The intention of the FSA with the new functions is to apportion more responsibility to those holding significant influence functions (in particular non-executive directors) and create accountability for decisions made within firms. The new regime will also mean that individuals applying for the new functions may be interviewed by the FSA until their functions are accepted.

The regime was originally expected to be in place by 1 May however due to internal issues at the regulator, the implementation of the new rules has been delayed until further notice.

In the meantime, firms are recommended to review the changes that will be brought on by the new rules and their applicability.

Below we have summarised some of the changes that will be of interest to asset management businesses.

For further information, please do not hesitate to contact us and we would be happy to advise you on the new rules.

Governing Functions
Function CodeFunction NamePurpose
CF00Parent EntityThis is a new function. The function will be applicable to those individuals who are directors, non-executive directors, partners, members, senior managers or employees of a parent undertaking whose decisions and actions are taken into consideration by the regulated firm’s governing body.

Regulatory Hosting

Laven offers a UK regulatory hosting platform which provides clients with the opportunity to conduct regulated activities as an Appointed Representative (AR).


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