The Markets in Financial Instruments (Capital Markets) Regulations
What has happened?
On 30 June 2021, the Markets in Financial Instruments (Capital Markets) (Amendment) Regulations 2021 were published on the legislation.gov.uk website. Together with planned FCA changes to the relevant requirements included in FCA Consultation Paper 21/9: Changes to UK MiFID’s conduct and organisational requirements, the Regulations remove the obligation on trading and execution venues to publish RTS 28 reports relating to the quality of order execution obtained on them.
The Regulations will mostly come into force on 26 July 2021.
What do you need to do?
The Regulations put into effect are the following:
- They remove the obligation on investment firms to produce an annual report (the RTS 28 report) setting out the top five venues used for the execution of client orders and a summary of the execution outcomes achieved. The Regulations also make amendments to reflect this measure, by removing the (now obsolete) obligation for investment firms that execute retail client orders to include a link in their execution policy summary to the execution quality reports published for each execution venue listed by the firm in its execution policy.
- They amend an existing requirement for investment firms providing portfolio management services to inform their clients whenever the overall value of the portfolio depreciates by 10% and thereafter in multiples of 10%. The Regulations revoke this obligation in respect of professional clients. The Government plans to consult on whether this change should be extended to retail clients as well.
- They amend an existing obligation for firms to provide detailed contract notes for trades executed on behalf of clients, and quarterly reports on portfolio management services. The Regulations revoke these obligations in respect of wholesale clients. The Government plans to consult on the merit of extending this measure to retail clients.
- They exempt investment firms providing portfolio management services from the requirement to provide cost-benefit analyses to professional clients when they switch the instruments in which they invest.
- They amend an existing requirement for an investment firm to provide specified information relating to its services to clients before a service is carried out. This specified information concerns the investment firm and its services, the financial instruments and proposed investment strategies, execution venues and all costs and related charges. The Regulations revoke the obligation for an investment firm to provide specified information relating to its services to clients before a service is carried out where the services are provided to eligible counterparties.
Where agreements to buy or sell financial securities are concluded via distance communication, the Regulations allow investment firms, where the client consents and the investment firm has given the client the option of delaying the conclusion of the transaction until the client has received the information, to provide costs and charges information to clients after the transaction has been concluded. However, the firm must provide the client with the option of receiving the information by telephone before the conclusion of the transaction.
- They make electronic communication with wholesale clients the default mode of communication. Under existing rules, paper is considered the default means of communication in most cases.
How can we help you?
If you’d like to know more about how we can help you with your trade execution/client reporting arrangements, or any other regulatory compliance issues, our expert team is here to help.
Contact us today on 0207 436 0630 or email info@thistleinitiatives.co.uk.