The European Commission has adopted a Delegated Directive supplementing the MiFID II Directive regarding the safeguarding of financial instruments and funds belonging to clients, product governance obligations and the rules applicable to the provision or reception of fees, commissions or any monetary or non-monetary benefits (inducements).
The Delegated Directive has four chapters:
- chapter I clarifies the rules that are further specified under the Delegated Directive and the application of these rules to management companies under the UCITS Directive and the Alternative Investment Fund Managers’ Directive;
- chapter 2 covers safeguarding of client financial instruments and funds. In particular the Delegated Directive further specifies the measures ensuring the appropriate use of title transfer collateral arrangements when dealing with non-retail clients or preventing the unintended use of client financial instruments, the arrangements to be adopted with respect to securities financing transactions or those concerning the recording and disclosure requirements;
- chapter 3 covers product governance requirements. The chapter sets out details for the implementation of the product governance rules introduced under MiFID II. The product governance rules concern both investment firms that manufacture financial instruments as well as investment firms that distribute them to clients; and
- chapter 4 covers inducements. The chapter sets out the rules with which an investment firm has to comply when providing or receiving fees, commissions or any monetary or non-monetary benefits.
The Delegated Directive needs to be published in the Official Journal of the EU, following which it will enter into force 20 days later.
