Investor Protection Under MiFID II: A step too far or a golden opportunity?
By broadening the reach of the regulatory framework to the full product and service cycle, MiFID II emphasises the role of product governance (manufacturing and distribution) and the product intervention in preventing harmful products from reaching the market. The main conclusion drawn from participants at an CEPS-ECMI half-day seminar on September 26th is that despite the progress made over the last few months, such as the European MiFID Template (EMT), which is expected to standardise the information shared between product manufacturers and distributors, as well as ESMA’s latest guidelines for the Target Market identification, further work and clarification are needed.
The research reforms in MiFID II involve significant challenges for firms (particularly in relation to fixed income, commodity and currency research). For example, concerns were expressed by the participants at the seminar over the ability to pay for research outside of the EU (e.g. in the US) and the danger of having a mechanism for research payment that will be overly prescriptive. However, the regulatory patchwork (PRIIPS, MiFID II, IDD and other national legislation) creates contradictions that may inhibit the enhancement of investor protection.
Thus, there is an important coordinating role that ESMA (together with national competent authorities) could play in strengthening the monitoring of financial markets and the development of appropriate tools for doing so. Certainly, more regulatory convergence between member states, as well as regulatory initiatives within states would contribute to a more uniform approach.