implementation of mifid legislative adjustment: new rules and regulations introduced by the new...
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Implementation of MiFID
Legislative Adjustment: New Rules and Regulations Introduced by the New Directive
Matjaž AlbrehtAssistant Director
The Slovene Securities Market Agency
Split, 14. – 15. June 2007
Disclosure
Any views expressed in this presentation do not necessarily
reflect views of the Slovene Securities Market Agency.
Agenda
About MiFID
Financial Instruments Market Act (FIMA) in Slovenia
Status of adopting FIMA: timetable
Novelties introduced by FIMA
Impact of MiFID on the EU accession countries
VISION
Markets in Financial Instruments (MiFID) would
play an important role in the wider European
economic reform agenda given the contribution
that deep and liquid capital markets can make
to encouraging investment, innovation, growth
and employment.
Financial Instruments Market Act
Markets in Financial Instruments Directive will be
implemented in Financial Instruments Market Act (FIMA) in
Slovenia, which will represent new legal environment for
Slovene capital market and will replace the present
Securities Market Act.
New Legal Framework in the Slovene Capital Market: FIMA
It will replace the present Securities Market Act (adopted in 1999).
It is fully harmonized with the following main Directives:1. Market Abuse Directive – MAD (2003/6/EC)
2. Prospectus Directive (2003/71/EC)
3. Markets in Financial Instruments Directive– MiFID (2004/39/EC)
4. Transparency Directive (2004/109)
... and other directives: 89/117, 97/9, 98/26, 2001/34, 2003/124, 2003/125, 2004/72, 2006/48, 2006/49;
and regulations: 2273/2003, 809/2004, 1287/2006.
Process of adopting FIMA
30.04.2006
31.01.2007 01.11.2007
MiFID entered in force
MiFID should be transposed by Member States
MiFID measures should be applied
by industry
TIMELINE
TIMELINE
01.07.2007
All executive acts should enter into
force
01.08.2007
15.08.2007
FIMA should be in reading in Parliament
FIMA should enter into force
FIMA should be published in Official
Gazette of RS
Transposition delayed
Nov.2006draft sent in government procedure
May 2007draft sent in government procedure
Ministry of Finance&
Ministry of Public Administration
FIMA
Jan.2007draft has been
withdrawn
Structure of FIMA
FIMA590. Articles
Banking Act416. Articles
FIMA by-lawsapp. 40 new ones
BA by-lawslogical application
Novelties introduced by FIMA
Type of investment firm determined by authorised capital
Defining “Small Investment Firm”
Systematic internalisers
Borrowing/lending customers financial instruments/ funds
Outsourcing
Tied Agent
Types of Investment firms
The scope of services listed in the Article 8 of FIMA that an investment firm can perform is determined by its amount of the authorised capital:
1. Min. value of authorised capital 730.000 EUR =
Investment firm can perform all services and activities listed in Article 8 of FIMA.
2. Min. value of authorised capital 125.000 EUR =
Investment firm can provide all services and activities, except: dealing on its own account; underwriting of financial instruments and/or placing
of financial instruments on a firm commitment basis.
Types of Investment firms - continuation
3. Min. value of authorised capital 50.000 EUR =
Investment firm can provide all services and activities, except:
dealing on its own account;
underwriting of financial instruments and/or placing of
financial instruments on a firm commitment basis;
safekeeping and administration of financial instruments
for the account of clients, including custodianship and
related services such as cash/collateral management.
“Small Investment firm”
... is an investment firm that can perform only the following investment services and activities:
transmission of orders in relation to transferable securities
or units of collective investment undertakings to persons
from Article 32. FIMA (providers of investment services
and activities);
investment advise;
And whose yearly income could not exceed 750.000 EUR.
SIF: special rules
Provisions of FIMA do not apply to: value of authorised capital; performing services and activities outside the territory of RS; obligation to disclose supervised information; risk management; rules of operations on performing investment services and
activities; system of guarantees with regard to investors’ claims.
It can perform only investment advising and trading of insurance products.
It should have protection of it’s liability for damage in relation to it’s customers.
MTF & Systematic Internaliser
MTF is a multilateral system, operated by an investment firm or a market operator which brings together multiple third party buying and selling interests in financial instruments in the system in a way that results in a contract in accordance with special rules for MTF.
Systematic internaliser is an investment firm which on an organised, frequent and systematic basis deals on its own account by executing client orders outside a regulated market or an MTF.
Borrowing/lending customers financial instruments/funds
Investment firm should not be allowed to use customers
financial instruments or funds, held by them on behalf of a
client, for their own account or the account of another client
of the firm, unless: the client gives prior express consent to the use of his/her
instruments or funds on specified terms, signed by the client;
consensus could be general or particular for use of client’s
instruments or funds in a single transaction.
DUE CARE OF INVESTMENT FIRM WITH CUSTOMER’S ASSETS
Outsourcing
If investment firms outsource critical or important operational functions or any investment services or activities to a third party, they have to adopt all reasonable measures to avoid unnecessary additional operational risks.
It is not permitted that investment firms outsource performing important operational functions in the way that would make the quality of internal control system’s performing impossible or extensively difficult as well as that would make compliance with relevant law difficult.
Tied Agent
... is natural or legal person who under the full and unconditional responsibility of only one investment firm on whose behalf it acts:
promotes investment and/or ancillary services to clients or
prospective clients;
receives and transmits instructions or orders from the
client in respect of investment services or financial
instruments;
sales financial instruments;
provides advice to clients or prospective clients in respect
of those financial instruments or services.
MiFID’s impact for the EU accessing countries
Opportunity for domestic investment firms to act cross
national borders using single passport.
Competition between exchanges and other trading
platforms will significant reduce transaction costs.
Lower costs and cross-border trading will increase
liquidity of domestic market.
Suggestion: learn on experiences and mistakes of EU
Member States.
TREM
Investment firms which execute transactions in any financial instruments admitted to trading on a regulated market should report details of such transactions to the competent authority as quick as possible and no later than at the close of the following working day. This obligation should be applied whether or not such a transactions were carried out on a regulated market.
The competent authority should establish the necessary arrangements in order to ensure that the competent authority of the most relevant market in terms of liquidity for those financial instruments also receives this information.
Principles for transaction reporting
Duties of investment firms: Report transactions to home competent authority ASAP All transactions: On the exchange + off the exchange Special case: Branches
Duties of competent authorities: Set up a national transaction reporting system Exchange TRs between certain competent authorities Principle: „Most relevant market in terms of liquidity“
Deadlines for competent authorities
Questions?
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