The PRA has published Consultation Paper 43/16: Implementation of MiFID II: Part 2 (CP43/16). CP43/16 is the PRA’s second consultation on MiFID II and follows Consultation Paper 9/16: Implementation of MiFID II: Part 1 (CP9/16). In CP9/16 the PRA consulted on the implementation of the MiFID II passporting regime and algorithmic trading. A subsequent Policy Statement to CP9/16, Policy Statement 29/16: MiFID II: Response to CP9/16, (PS29/16) was published in October. Our blog entries on CP9/16 and PS29/16 can be found here and here.
In CP43/16 the PRA sets out proposals:
- to enhance governance through MiFID II’s management body requirements and key organisational requirements which will apply to MiFID II and non-MiFID II business. The PRA proposes to amend its rules by extending the substantive requirements of the relevant MiFID II Delegated Regulation (Delegated Regulation of 25.4.2016 supplementing MiFID II as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive) to apply across all businesses and firms within the scope of the rules. In particular, the PRA proposes to introduce new rules that implement Articles 9 and 16 of MiFID II which relate to the management body and organisational requirements respectively. The PRA believes that this will ensure that firms are able to apply the same requirements and standards across the whole of their business; and
- for granting authorisations in respect of a new MiFID II investment activity, ‘operation of an organised trading facility’ (OTF), a new MiFID II financial instrument ‘emission allowances’ and structured deposits.
The PRA notes that HM Treasury has consulted on amending the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO) to include the OTF category as a regulated activity and emission allowance as a specified investment. Firms will have to apply to the PRA for a Variation of Permission (VoP) to add this activity or investment to their Part 4A permission. If HM Treasury grant the power for the appropriate regulator to process these applications in advance of MiFID II implementation, the PRA proposes that firms would be able to apply in advance of 3 January 2018. For dual regulated firms the appropriate regulator will be the PRA. The PRA will provide more information when it issues its final policy.
On structured deposits the PRA notes that the proposed amendments to the RAO include a transitional provision by which, for as long as it applies, the VoP requirements contained in the Financial Services and Markets Act 2000 are disabled for firms that are already advising on investments, arranging deals in investments (including making arrangements with a view to transactions in investments), dealing in investments as agent, and managing investments. Instead, a VoP is deemed to have taken place, and permission to carry out the relevant regulated activity or activities in relation to structured deposits is deemed to have been obtained, if the relevant firm has notified the appropriate regulator of its wish to carry out the relevant activity or activities in relation to structured deposits, and the appropriate regulator has acknowledged receipt of the notification. The PRA proposes to direct firms that wish to use this transitional approach to notify it using a form which will be available on its website.
The deadline for comments on CP43/16 is 27 February 2017.
View Implementation of MiFID II: Part 2 – CP43/16, 25 November 2016