Cost and Charges

The FCA has concluded the following:

  • The rules will be made as proposed in CP16/29, which impose, align with or reference the requirements under MiFID II Article 24(4) first and last paragraphs, 24(4)(b) and (c).
  • Aggregated and ongoing information on costs and associated charges go beyond what is currently required – MiFID investment firms and Article 3 firms (carrying on MiFID‑scope business) need to include certain information on costs and charges. This includes the cost of advice, the cost of the instrument recommended or marketed, how the client pays for it and the cost of third-party payments.
  • All costs and charges which are not caused by the occurrence of an underlying market risk need to be aggregated.
  • Aggregated information needs to be provided on a regular basis during the lifetime of the investment, at least annually.
  • Point of sale disclosure of costs and charges needs to be completed in good time, without exceptions.  Where there is an on-going relationship, this information must be provided on a regular basis, at least annually.
  • For firms doing non-MiFID business, the previous requirements will continue to apply.

Recording Communications

The FCA has concluded the following:

  • The MiFID II Taping regime will not be extended to capture all aspects of corporate finance business, but communications occurring during corporate finance business would be in-scope insofar as they are automatically captured by MiFID II in Article 16(7).
  • For portfolio management, the qualified exemption available to discretionary investment managers has been removed. The requirement to hold records for a common period of 5 years after the creation of the record will continue. Financial instruments not linked to trading on a trading venue have been removed from the scope of financial instruments required to tape by non-MiFID firms.
  • The approach set out on CP16/29 and CP16/43 on energy market participants (EMPs), oil market participants (OMPs) and firms conducting other non-MiFID commodity and exotic derivatives business will continue to be applied.
  • The application of the MiFID II taping provisions to branches of third country firms is confirmed.
  • In PS17/5 additional flexibility for Article 3 retail financial advisers (RFAs) was considered appropriate, and so the ability for RFAs to choose between making written records, or recording relevant conversations, should enable these firms to make cost effective decisions. The policy is going to be applied consistently across the market for firms of all sizes, and there will be no differentiation based on a firm’s size. All Article 3 RFAs can therefore comply with the “at least analogous” requirement and either tape all relevant conversations or make written records of those conversations.
  • The proposals which set out a single set of organisational requirements which are consistent with MiFID II were confirmed.

Corporate Finance Business

The FCA has concluded the following:

  • COBS 18 contains a range of tailored conduct regimes for different types of specialist designated investment business, and generally work by referencing other parts of COBS.
  • In CP16/43 the FCA proposed implementing specialist conduct of business regime requirements in COBS 18 which included corporate finance business (COBS 18.3).
  • A new table will be inserted in COBS 18.3 titled ‘Corporate finance business – optionally exempt business’ and captures the list of COBS provisions that will apply to corporate finance boutiques that undertake optional exempt business under Article 3 of MiFID II.
  • Revised references are also placed within COBS 18.3 to reflect consequential changes to the Handbook by the FCA in the consultation papers.